Portfolio | October 2014

Portfolio Exclusive to Emirates First Class and Business Class

STORAGE WARS The Big Data Battle INTERNET ATHLETES Money, Fame and Esports GREAT MIGRATION China’s Relocating Factories

Jorgen Vig

Knudstorp Lego’s Master Builder

Issue 106 ■ October 2014

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Portfolio

Exclusive to Emirates First Class and Business Class

Cover Story 42 Rebuilding the Lego Brand Brick

by Brick In 2003, Lego was on the verge of collapse and was forced to sell off assets with venture capitalists ready to pounce on the company.

CEO Jorgen Vig Knudstorp was tasked with saving the company, and today Lego is the world’s biggest toy company.

Features 50 Internet Athletes, Imaginary Sports, Real Crowds

68 Speculators Bet On New Capital Andhra Pradesh needs to build a new capital after India split the state in two, leading to rampant land speculation.

Professional video game competitions, widely known as esports, are attracting huge audiences and major sponsors.

56 Tempting Factories to Move

74 Renewable Energy Threatens Utilities Electric utility companies are becoming nervous as countries

States in China’s interior are wooing factories with cheaper

such as Germany generate more and more renewable

land and labour, as well as other incentives.

energy, which threatens their long-established business plans.

62 Storage Wars Cloud storage companies are having to adapt as tech giants such as Google, Amazon and Microsoft enter the fray.

50

56

74

19

Portfolio

20

Exclusive to Emirates First Class and Business Class

Essentials 81 Manchester by Cab There is a lot to see and experience in Manchester ranging from football and music through to the Industrial Revolution and architecture.

86 The Business of Mooncakes Mooncakes are a staple of the Chinese Mid-Autumn Festival, and just like fruitcakes in the West, they are both loved and

81

loathed.

92 Environmentally-friendly Biorubber Patagonia, a benefit corporation, is making wet suits from a natural rubber derived from a desert shrub.

96 Picasso Museum to Reopen At Last Numerous delays, the ousting of the president, the ire of neighbours and infighting has marred the renovation of the Picasso Museum. But new president Laurent Le Bon says

86

those problems are past.

100 A Reboot for the Sneaker Shoes made from Tyvek, a material consisting of highdensity polyethylene fibres, are lightweight, sturdy and catching on with millennials.

104 Other Business Portfolio takes a light-hearted look at the latest business news.

96

Departments 23 Notebook World business in a nutshell.

31 Observer Spotting and analysing business trends.

40 Column: Rich McEachran Meeting the Future’s Nutrition Needs

Published for Emirates by

Media One Towers, Dubai Media City, PO Box 2331, Dubai, UAE. Telephone: (+971 4) 4273000 e-mail: emirates@motivate.ae

100

Editor-in-Chief Obaid Humaid Al Tayer Managing Partner & Group Editor Ian Fairservice Editorial Director Gina Johnson Group Editor Guido Duken Junior Writer Mary Sophia Picture Researcher Hilda D’Souza Editorial Assistant Londresa Flores Senior Art Director Tarak Parekh Senior Designer Charlie Banalo Head of Production S Sunil Kumar Assistant Production Manager Murali Krishnan Group Sales Manager Jaya Balakrishnan Email: jaya@motivate.ae General Manager – Group Sales Anthony Milne Email: anthony@motivate.ae Sales Manager Melroy Noronha Email: melroy@motivate.ae

INTERNATIONAL MEDIA REPRESENTATIVES AUSTRALIA/NEW ZEALAND Okeeffe Media; Tel + 61 412 080 600, licia@okm.com.au BENELUX M.P.S. Benelux; Tel +322 720 9799, francesco.sutton@mps-adv. com CHINA Publicitas Advertising; Tel +86 10 5879 5885 GERMANY IMV Internationale Medien Vermarktung GmbH; Tel +49 8151 550 8959, w.jaeger@imv-media. com HONG KONG/MALAYSIA/THAILAND Sonney Media Networks; Tel +852 2151 2351, hemant@sonneymedia.com INDIA Media Star; Tel +91 22 4220 2103, ravi@ mediastar.co.in ITALY & SPAIN IMM International; Tel +331 40 1300 30, n.devos@imm-international.com JAPAN Tandem Inc.; Tel + 81 3 3541 4166, all@tandem-inc. com NETHERLANDS GIO Media; Tel +31 6 29031149, giovanni@gio-media.nl TURKEY Media Ltd.; Tel +90 212 275 51 52, mediamarketingtr@medialtd.com.tr UK Spafax Inflight Media; Tel +44 207 906 2001, nhopkins@spafax.com USA Totem Brand Stories; Tel +212 896 3846, faith.brillinger@totembrandstories.com

Emirates takes care to ensure that all facts published herein are correct. In the event of any inaccuracy, please contact The Editor. Any opinion expressed is the honest belief of the author based on all available facts. Comments and facts should not be relied upon by the reader in taking commercial, legal, financial or other decisions. Articles are by their nature general, and specialist advice should always be consulted before any actions are taken.

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Notebook

23

getty images

BUSINESS NEWS IN BRIEF

World Population to Hit 11 Billion in 2100 According to A new study,

Professor Adrian Raftery, at the University

decline has stalled completely with the

scientists say the world’s population is

of Washington, who led the international

average woman bearing six children.

likely to reach 11 billion by the end of

research team. “There is now a strong

Nigeria’s population is expected to soar

the century, overturning the consensus

argument that population should return

from 200 million today to 900 million

that it will peak by 2050 at about nine

to the top of the international agenda.

by 2100.

billion people.

Population is the driver of just about

Another population concern is the ageing

everything else and rapid population growth

populations currently seen in Europe

international team including UN experts, is

can exacerbate all kinds of challenges.” Lack

and Japan, which raise questions about

published in the journal Science and for the

of healthcare, poverty, pollution and rising

how working populations will support

first time uses advanced statistics to place

unrest and crime are all problems linked to

large numbers of elderly people. The new

convincing upper and lower limits on future

booming populations, he said.

research shows the same issue will affect

The research, conducted by an

population growth.

Sub-saharan Africa is set to be by far the

countries whose populations are very young

fastest-growing region, with population

today. Brazil, for example, currently has

cent chance that the number of people

rocketing from one billion today to

8.6 people of working age for every person

on the planet will rise continuously from

between 3.5 billion and five billion in

over 65, but that will fall to 1.5 by 2100, well

seven billion today to 11 billion in 2100,

2100. Previously, the fall in fertility rates

below the current level in Japan. China and

which would pose grave challenges for food

that began in the 1980s in many African

India will face the same issue as Brazil, said

supplies, healthcare and social cohesion.

countries was expected to continue, but

Raftery: “The problem of ageing societies

“The previous projections said this

the most recent data shows this has not

will be on them, in population terms, before

problem was going to go away so it took

happened. In countries like Nigeria, the

they know it and their governments should

the focus off the population issue,” said

continent’s most populous nation, the

be making plans.” n

The research shows there is a 70 per

October 2014

Notebook Numbers Game

Boom Erodes Pricing Premium A surge in luxury homebuilding in London is eroding the

€1.7

billion worth of

premium that developers

pesetas, the

can charge buyers to acquire a new property.

currency that disappeared when

Average sales prices of

the euro was introduced 12 GETTY IMaGES

years ago, are yet to be cashed in for euros according to Spain’s central bank. The central bank estimates that about 45 per cent of this money will never be exchanged as it has either being kept by collectors, lost, or taken home by millions of

new apartments in London’s most expensive districts exceeded those of older flats by 43.1 per cent at the end

$2

billion was offered by Microsoft for the Swedish company Mojang aB, the maker of hit video game Minecraft. Microsoft is seeking to make Minecraft, which has sold more than 50 million copies since its release five years ago, an exclusive title on its Xbox gaming system.

of the first quarter, down from 67.6 per cent in 2012, according to a report by London-based broker Huntly

tourists. People have until 2020

Hooper Ltd. An increase in

to cash them in.

construction combined with a

$3.3

billion acquisition of General

Electric’s appliances business

The World

weaker property market may

In Figures

the year, Oliver Hooper,

reduce the gap further during director of Huntly Hooper, said in the statement.

will boost Sweden’s Electrolux’s

The average initial selling

presence in the US and take

Tesla would be exempted from

on rival Whirlpool. Electrolux

paying sales taxes for 20 years

price of a new apartment

is the world’s second-largest

and property or business taxes

in London’s most expensive

appliance maker after Whirlpool,

for 10 years. It also would receive

and has its strongest market

$195 million of tax credits for over

position in Europe.

20 years.

$825

districts has climbed 151 per cent to £1.5 million since

by Hong Kong in its first-ever

2009, Huntly Hooper said.

issue of the securities, attracting

The average resale value for

million worth

orders more than 4.7 times the

older properties has gained

of assets are

amount on offer. Hong Kong,

about 61 per cent to £1.1

to be disposed off by India’s

along with the UK, is vying to

million pounds.

Lanco Infratech in a bid to

become a Shariah-compliant

raise cash to clear up its $2.5

hub in a market with $2 trillion

billion in tax

billion debt. Lanco Infratech, like

worth of Islamic banking assets

incentives has

many of India’s private power

ready to be tapped.

been offered by US state

producers, are weighed down by

Nevada to Tesla Motors Inc.

debts due to a slowdown in the

that plans to build the world’s

domestic economy and delays in

largest lithium-ion battery plant.

completing new projects.

Officials say the facility would boost the state’s economy by $10 billion over two decades.

$6.5

billion was added to the net worth

of the world’s 400 richest people as alibaba Group Holding Ltd.

$1

billion of sovereign

staged the biggest initial public

Islamic bonds were sold

offering ever in the US.

GETTY IMaGES

$1.3

GETTY IMaGES

24

Portfolio

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Notebook

26

Poverty Falls in Us

Poor Americans are finally starting to benefit from an economy that is now in its sixth year of expansion. According to Census Bureau data, the US poverty rate eased to 14.5 per cent in 2013 from 15 per cent in the prior year, the first decline since 2006, the year before the last recession began.

Faster economic growth and a jobless rate that dropped to 7.4 per cent on average getty images

in 2013 from 9.3 per cent in 2009 have helped to reduce the rate of poverty. Even so, there were 45.3 million impoverished Americans, little changed from 2012, and

an estimated $51,759 the previous year,

from 3.4 per cent in 2007. The top quintile

the rate remains higher than 12.5 per cent

the Census data showed. In 2007, the

claimed 51 per cent of all money income

in 2007.

median income was $56,436.

in both 2013 and 2012, the report showed,

An inhospitable job market has

Those at the bottom of the income

compared with 49.7 per cent in 2007.

weighed on incomes for many families,

scale have borne the brunt of economic

The poverty threshold in 2013 for one

though a pickup in hiring may be starting

weakness. The lowest quintile of earners

person under the age of 65 was $12,119. It

to bring relief. Median earnings for US

took home 3.2 per cent of money income

was $18,769 for a family with one parent

households rose to $51,939 in 2013 from

in 2013, the same as in 2012 and down

and two children.

China Adds Stimulus China’s central bank joined its European

expansion since the global financial crisis

counterpart in boosting liquidity to

and moderating investment and retail

address weakening growth, underscoring

sales growth shown in data released on

a divergence in direction among the

September 13 underscored risks of a

world’s biggest economies as the US

deepening economic slowdown. Those

reduces stimulus.

readings followed a second straight drop

The People’s Bank of China is injecting

in imports and a 40 per cent decline in

$81 billion into the nation’s largest banks,

the broadest measure of new credit for

signalling the deepest concern yet with

August, as well as indicators showing a

an economic slowdown. China’s credit

manufacturing pullback.

ReUteRs

expansion builds on targeted measures to

policy response to weak August data”

the broad-based stimulus seen in the US

on the economy, Goldman Sachs Group

in the wake of the global financial crisis

wrote in a research note. “We expect

and still being pushed in Europe and

monetary conditions to loosen modestly,

Japan. By attaching a three-month term

which will provide some much-needed

to its injection, China is taking a step

support for demand growth. Other policies

down that path while maintaining control

may follow.”

of a process designed to fuel demand for People’s Bank of China Governor Zhou Xiaochuan

The injection marks “the first clear

shore up growth while stopping short of

credit in an already debt-laden economy.

The weakest industrial-output

Further steps may include accelerating planned fiscal spending, the Goldman analysts wrote.

Portfolio

28

Notebook DUBAI EVENT: GITEX TECHNOLOGY WEEK WEBSITE: GITEX.COM DATE: OCTOBER 12-16 VENUE: DUBAI WORLD TRADE CENTRE Discover the latest in technology and witness the launch of new brands at this annual gathering. Fresh events lined up for this edition are five high-impact briefings, including GITEX Tech Talk Bloggers, GITEX Smart Cities experience and GITEX After 5 where visitors get to engage with key exhibitors in a relaxed setting. Another highlight is the Hot Stuff Awards where the best gadgets compete to be crowned GITEX champion – the winner will be announced at a brand new Hot Stuff Awards party organised on the last day.

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Over three days the conference programme’s main topic centres on mining in the MENA region. Keynote speakers will address various angles including how mining companies can capitalise on the vast potential for mineral exploration in the region, best practices for conserving local environment and evaluating the potential for joint ventures, collaboration and partnership prospects.

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EVENT: THE BIG ENTERTAINMENT SHOW WEBSITE: BIGENTERTAINMENT.AE DATE: OCTOBER 27-28 VENUE: DUBAI INTERNATIONAL CONVENTION AND EXHIBITION CENTRE The UAE’s biggest gaming convention offers plenty of game sessions, demos and exhibits.

This edition is bigger and better with added features and increased stand space. For the first time there will be The Toy Focus event, which puts the spotlight on the toy and entertainment products industry where manufacturers and importers showcase products and advance services in the field. Another highlight is the Independent Game and Apps Developers Focus aimed at independent content developers.

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Taking centre stage this year is the offshore marine sector due to the large market demand for information in this field. There will be sessions and discussions on a host of topics including the outlook for the region’s offshore industry, solutions required in building offshore support services, and steps to be taken in the recruitment and retention of quality crew.

EVENT: HR SUMMIT AND EXPO 2014 WEBSITE: INFORMA-MEA.COM/HRSUMMIT DATE: OCTOBER 20-22 VENUE: DUBAI INTERNATIONAL CONVENTION AND EXHIBITION CENTRE Running for more than a decade, the Middle East’s largest show dedicated to HR professionals will focus on the key indicators of employment, youth employability and nationalisation. The summit programme includes sessions with six of the best-in-class thinkers including authors and inspirational speakers such as Olympic swimmer Mark Foster, HR and leadership expert, Marshal Goldsmith, and Liz Wiseman – the author of the Wall Street Journal bestseller Multipliers. Plus there will be 60 concurrent sessions covering key topics ranging from technology, compensation and recruitment.

Portfolio

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Observer

31

BUSINESS NEWS IN BRIEF

Nicole Myers, 19, bought a new iPhone rather than spend the money on clothing.

Teenagers Track Tech Trends Teenagers used to be obsessed with keeping up with the latest clothing trends. Today, their focus has shifted to their smartphones, report Elizabeth Harris and Rachel Abrams.

do lots of cool stuff than clothing,” said Nicole Myers, 19, a model in New York who emerged from an Apple store in August with a new iPhone that cost about $200. “A phone keeps you much more entertained.

It’s a better distraction than clothing.”

Analysts and trend-spotters agree that a major shift in teenage trends, and in teenage spending, is underway. John Morris, a retail

For some teenagers, wearing

analyst at BMO Capital Markets, says that his regular focus groups with teenagers

last season’s jeans will always be unthinkable.

“Clothes aren’t as important to me,”

But a growing number consider texting on a

said Olivia D’Amico, a 16-year-old from

about what trends they find most appealing

dated smartphone even worse.

New York, as she shopped with her sister

often stray from clothing.

For teenage clothing retailers, that © 2014 New York Times News service

the latest in hand-held technology.

and a friend. “Half the time I don’t really

“You try to get them talking about

screen-obsessed teenager poses a big

buy any brands. I just bought a pair of

what’s the next look, what they’re excited

threat in the still-important back-to-school

fake Doc Martens because I don’t really

about purchasing in apparel, and the

sales season.

care.” She probably spends more on

conversation always circles back to the

technology because she likes to “stay

iPhone 6,” he said. “You get them talking

connected,” she said.

about crop tops, you get a nice little

Strategically ripped jeans no longer provide an assured spot for retailers in the marketplace of what’s cool at high school.

The social cachet these days involves waving October 2014

“It’s definitely more exciting for a lot of teenagers to have a new phone that can

debate about high-waist going, but the conversation keeps shifting back.”

32

Observer per cent. Cellphone penetration is high and

going to show up like clockwork in July

whose sales account for about 15 per cent

children must generally wait for the next

and buy goods in that time frame,” Morris

of all apparel sales, according to the NPD

The teenage apparel sector of retailing,

generation for their next device, she said.

of BMO said. Analysts say that retailers

Group, is in a deep slump as sales have

But technology does seem to indirectly

appear to have learned that lesson, and

declined over the last several quarters.

influence other spending habits, she said.

have planned their inventory accordingly,

Aside from the attention given to tech items

For the first time, Piper Jaffray’s semi-

often by ordering fewer items and focusing

like phones, apps and accessories, some

annual survey of teenagers in the spring

on their margins.

longstanding retailers have been hard hit

found that they spent more money on food

by competition from fast-fashion stores like

– just barely topping clothing – than any

want to have it be successful, but each year,

Forever 21 and H&M, which offer up-to-the-

other category. “There’s this magnetism to

it seems it’s a little bit harder to do as well as

minute trends at low prices. Online shopping

restaurant environments,” Wissink said. “So

you did before,” said Richard Jaffe, an analyst

has also reduced mall traffic among teenage

we talked to teens about why, and it’s the

at Stifel. “The peak becomes less of a peak.”

consumers, and the popularity of Instagram

free Wi-Fi.”

whips fads around so quickly that teenagers

“I’m addicted to Instagram,” said Ann

“Back-to-school is important, and people

“Back in the day, we ate three square meals a day, and now what’s trending is

Borrero, a 19-year-old who attends high

grazing,” Chen said. “I think shopping

school in Brooklyn and has a running list

is kind of similar. You are constantly

of the restaurants she often chooses to get

shopping throughout the year, and in

internet access. “I just usually know, like

smaller ways. But I think that’s something

phone,” Caitlin Haywood, 15, a high school

McDonald’s always have Wi-Fi, little cafes

that affects teens and women – it’s a larger

sophomore from New York, said on her way

always have Wi-Fi.”

trend, period.” n

are not chasing one enduring fashion item.

Young shoppers are the first to point out the use of phones in e-commerce.

“You can shop online for clothes on your

into a Hollister in downtown Manhattan.

Top executives at traditional retailers

A fan of the store’s “California style,” she

have felt the strain of quarter after quarter

also noted that she owned many decorative

of disappointing results, and many of

coverings so that she could accessorise her

those companies have undergone upheaval

phone. That’s a fashion statement itself, she

in their top ranks. In August, the chief

suggested. “When you take pictures, people

executive of Aéropostale, Thomas Johnson,

see your case,” she said.

agreed to step down and be succeeded by

In fact, accessories like crystal-studded

his predecessor, Julian Geiger. In January,

phone cases or neon-coloured headphones

the chief executive of American Eagle,

are high on a teenager’s shopping list.

Robert Hanson, left the company after only

“Having a cool phone to show you’re

two years in the position. And that same

plugged in is a huge part of people’s style, a

month, Abercrombie & Fitch split the role

huge part of life these days,” said Eva Chen,

of chairman and chief executive under

editor in chief of Lucky Magazine, adding

pressure from investors.

that teenagers used smartphones to signal

In addition to changes in the teenage-

status in the way men used to do with

specific landscape, retailers across a

ornate watches.

range of categories are learning how to

A bright spot for teenage retailers might

manage a back-to-school season that

be the economics of the phone market, since

has shifted significantly in recent

most teenagers do not have the money to

years. While still a crucial season for

buy the newest iPhone or Samsung Galaxy

retailers, its window has become

the moment it is released.

less delineated, sometimes starting

Stephanie Wissink, a managing director

a bit later and often lasting past

at Piper Jaffray, said that after several years

the beginning of the school year.

of strong growth, the percentage of money

“The grave mistake was to

that teenagers spend on electronics appeared

annually assume that the

to have stabilised at around eight or nine

back-to-school shopper was

Teenagers use their phones for online shopping, which has reduced mall traffic.

Portfolio

Observer O N E 2 W AT C H TExT: HildA d’sOuzA

Craig Menear The Home Depot Inc. – the largest US home-improvement chain – has chosen the president of its US retail division, Craig Menear, as its new chief executive officer. The 57-yearold Menear will take the helm on November 1, replacing Frank Blake. Blake has been with the company since 2002 and has served as chairman and CEO for the past seven years. He will continue as the chairman of the company.

Home Depot, the fourth largest US retail company in terms of revenue, racked up over $79 billion in revenue last year.

Levels like that were last seen before the recession. While the American retailer is performing well, the company is pushing to build up its online sales that currently make up only 3.5 per cent of overall sales.

Menear is a 34-year retail veteran of which the last 17 years he’s worked at Home Depot and proved to be a key leader in the company’s success. He revamped its merchandising operations, strategy and supply chain and also spearheaded the company’s marketing and online business activities.

“Craig is a world-class retailer and has done a terrific job in recent years leading some of the most important and successful initiatives in our company,” said Blake in his congratulatory note on Menear’s appointment.

Menear, who hails from the state of Michigan in the US, is expanding the online product range by offering customers over 7000,000 items that span everything from pots and pans to bricks and mortar. He has stayed focused by investing beyond stores and instead building facilities such as distribution centres and a efficient supply chain. This allows customers to shop when, where and how they want in terms of buying direct from the stores or buying online and having goods delivered to their home or one of the 2,000 stores in the Home Depot network.

Menear, an Arts graduate from Michigan State University, aims at gaining market share in the retail industry by making online shopping cost effective, ensuring goods are delivered in an efficient manner, and capitalising on the ways customers engage in the digital space when it comes to selecting products.

Menear joined Home Depot in 1997 and started out as a merchandising manager overseeing the company’s southwest division. From then on he steadily rose through the company’s merchandising ranks to the top spot as CEO. Prior to joining the Home Depot, Menear had served in merchandising positions at various leading retailers including Swedish firm Ikea, Builders Emporium, and Grace Home Centers.

Dubai’s Super Developments Meraas Holding, a property development company, has outlined plans for the first phase of an entertainment and resort complex that promises the Middle East’s first Legoland theme park.

The project is part of a broader push by the Arab world’s commercial hub to ramp up its hotel and tourism offerings as it prepares to host the World Expo in 2020. Meraas Holding said that initial work began in February on the $2.7-billion Dubai Parks and Resorts project, and that the first phase should be done by 2016.

In addition to the Legoland park, that initial phase will include a Bollywood-themed park celebrating the Indian film industry, and another known as Motiongate Dubai that promises to bring Hollywood characters to life.

Plans also call for a central retail and dining plaza and family-friendly hotel at the complex, located in Dubai’s Jebel Ali area, which is best known for hosting the region’s largest seaport and the second of the emirate’s palm-shaped islands.

The Expo will be held nearby, alongside a new airport that officials envision will one day become the world’s busiest.

Dubai’s emblematic Atlantis resort also recently announced a $1.4 billion expansion. The 800-room hotel, The Royal Atlantis Resort and Residences, will feature modern architecture that allows for sky-high gardens and private infinity pools overlooking the island and water. There will also be 250 luxury residences in the resort.

Tourism plays a growing role in Dubai’s trade and transportation-dependent economy. Dubai aims to host 20 million visitors annually by 2020, up from 10 million in 2012.

getty iMAges

34

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Observer

36

Death of the iPod Amidst the fanfare of the iPhone 6, the

It sold one million songs in a week and 50

death of the iconic iPod just before its 13th

million in a year. Then it sold 50 million

birthday went largely unnoticed. When the

more in the next four months. When the

iPod debuted, a few weeks after 9/11, it was

store opened to international consumers, it

the latest testament to the idiosyncrasy of

sold 100 million more songs in five months.

Apple’s chief executive, Steve Jobs. Simplify,

In January 2007, Apple made the iPod

he ordered the engineers. A user should be

irrelevant. By the time Jobs introduced the

able to do anything with this in no more

iPhone, the company had sold 110 million

than three clicks.

iPods. Apple had to take the next logical

When the iPod was launched it sold for

offered much more functionality – phone

Apple sold 125,000 iPods in the first 60

calls, text messaging, even surfing the web –

days. Still, the iPod didn’t truly become

in an iPod-size device.

transformative until April 2003, when

getty images

step, replacing that gadget with another that

$400, far more than its competitors. Yet

The iPod marked the beginning of Apple’s

Apple launched its online music store with

transformation. Today, Apple has $164

this proposition: Get any song you want,

billion in cash and, since the day that Jobs

legally, for 99 cents and play it on your iPod.

introduced it in 2001, its stock price is up

The iTunes Music Store was a huge success:

8,234 per cent.

China Bans ‘Dirty’ Coal China, the world’s largest consumer of coal, will ban sales and imports of coal with

arsenic content from Australia.

Coal used in some coastal and developed

Separately, China has asked coal importers including power utilities and

high ash or sulphur in a move to promote

regions including Beijing, Shanghai and

coal miners to reduce coal imports by 40

cleaner types of the fuel and improve the

Guangzhou should have ash content of less

million tons from September to December.

nation’s air quality.

than 16 per cent and sulphur of less than

According to analysts, China’s coal imports

one per cent, according to the regulation.

are expected to fall by 15 per cent this year.

Coal with ash content of more than 40 per cent and sulphur of more than three per cent is banned from sales and imports into China starting January 1, according to a regulation posted on the website of the National Development and Reform Commission yesterday. Lignite containing ash of more than 30 per cent and sulphur of more than 1.5 per cent is also prohibited.

Other limitations involve coal with chemical content such as mercury and arsenic. China The new regulation will affect low-quality coal’s flow into China, especially low-heating value coal from Indonesia and coal with

getty images

depends on coal for 65 per cent of its energy.

Portfolio

Observer The World

CompIled by Hilda d’souza

Top 10

OECD Slashes Growth Forecasts

WoRld’s MosT CoMPETiTiVE NaTioNs rank

country

1.

Switzerland

2.

Singapore

3.

United States

4.

Finland

5.

Germany

6.

Japan

7.

Hong Kong SAR

8.

Netherlands

9.

United Kingdom

10.

Sweden

Getty ImAGeS

38

The Organisation for Economic Co-operation and Development (OECD) slashed its growth forecasts for advanced economies and called on the European Central Bank (ECB) to use quantitative easing to shore up the Eurozone.

WoRld’s MosT CoMPETiTiVE MiddlE EasT aNd NoRTH aFRiCaN NaTioNs rank

country

The Paris-based thinktank described continued slow growth

global rank

in the euro area as the “most worrying feature” of its new

1.

United Arab emirates

12

2.

Qatar

16

3.

Saudi Arabia

24

4.

Israel

27

moderate rate. Trade growth therefore remains sluggish and

5.

Kuwait

40

labour market conditions in the main advanced economies are

projections. Its deputy secretary-general Rintaro Tamaki said: “The global economy is expanding unevenly, and at only a

6.

bahrain

44

improving only gradually, with far too many people still unable

7.

oman

46

8.

Jordan

64

to find good jobs worldwide.”

9.

morocco

72

10.

Algeria

79

country

1.

Switzerland

per cent growth made in May’s outlook. In 2015, it expects the Eurozone to grow 1.1 per cent, down from the 1.7 per cent

WoRld’s MosT CoMPETiTiVE EuRoPEaN NaTioNs rank

The OECD now forecasts Eurozone GDP will grow just 0.8 per cent this year, down from the previous forecast for 1.2

global rank 1

forecast in May. It also cut its US GDP forecast for this year to 2.1 per cent

2.

Finland

4

from 2.6 per cent. For the UK, the 2014 forecast was reduced by

3.

Germany

5

0.1 percentage points to 3.1 per cent. The forecast for the UK in

4.

Netherlands

8

2015 was edged up to 2.8 per cent from 2.7 per cent.

5.

United Kingdom

9

6.

Sweden

10

7.

Norway

11

8.

denmark

13

9.

belgium

18

for the euro area,” said the thinktank. Recent actions by the

10.

luxembourg

19

ECB are welcome, but further measures, including quantitative

SoURCe: WoRld eCoNomIC FoRUm— GlobAl CompetItIveNeSS RepoRt 2014-2015

“Given the low-growth outlook and the risk that demand could be further sapped if inflation remains near zero, or even turns negative, the OECD recommends more monetary support

easing [QE], are warranted.”

Portfolio

Commentary

40

Rich McEachran

Meeting the Future’s Nutrition Needs Do we neeD to change our

Harvesting seaweed in Bali.

concepts of what people eat in order to meet the world’s nutrition demands? Insects, lab-

developing countries to grow, harvest and process seaweed for multiple markets.

made meat, algae and 3D-printed fortified

Coastal communities across Africa and

food could be affordable and practical routes

Asia have been benefiting from seaweed

to reducing malnutrition.

farming for years, but some struggle to

The challenge for the development

make a living. Organisations such as Coast

sector is how these ideas can be put into

Trust in Bangladesh are promoting seaweed

practice. Collaborating with the private

cultivation and training locals to be farmers.

The FAO has previously said that getting

sector and startups, embracing new

more people in developing countries eating

attitudes offer some solutions.

seaweed requires scaling up production

excellent, and compared to conventional

getty images

technology and understanding cultural Insects: “They are nutritionally

to make more of it available, and teaching communities who are unaware of its

meat proteins, similar. They are high in

– meat from plants could provide self-

nutritious value. There is also a need to

unsaturated fatty acids, iron and zinc,” says

sufficiency in meat and protein production.”

remove any assumption that seaweed is a

Arnold van Huis, professor of entomology

Taylor says non-governmental

poor man’s food.

3D printed food: A team from National

and lead author of Edible Insects, a

organisations (NGOs) can benefit from

report by the UN’s Food and Agriculture

the technology by collaborating with the

University of Ireland Galway and Concern

Organisation (FAO) published in 2013.

private sector. Cost might be a stumbling

Worldwide (3d4AgDev) has been developing

“This is very important for pregnant women

block. In 2013, scientists made a burger in

3D printed tools to help smallholders in

and pre-school children in the tropics who

a lab for $250,000.

Kenya improve farming and local food

are anaemic or zinc deficient.”

If artificial meat is to feed developing

production. Elsewhere, a group of scientists

countries, the more likely scenario would see

in the Netherlands is looking into using base

people to change their diets, the FAO report

NGOs buying straight from producers. For

materials such as algae and insects to create

stressed. Often this can be achieved by

instance, Beyond Meat’s 12oz chicken retails

novel and nutritious food structures.

subtly incorporating them in traditional

at around $5.29 – (they are considerably

foods people are used to eating – an

cheaper than animal products because

emerging use of 3D printers in development

example is the WinFood project, which

livestock are less efficient at converting

work, the 3D food technology could help

sought to improve child nutrition in

vegetable protein into animal protein). If

ship nutrients to developing countries more

Cambodia and Kenya by producing a food

the price can come down further as the

efficiently. Base materials could be ground

partly made from insects.

technology develops, and again if NGOs

into powder before being shipped, and then

could buy in bulk, it would improve their

processed on site, added to food substances

efforts to deliver the required nutrients.

(peanut butter, chocolate), fed through

How the bugs are presented will help

artificial meat: “Bypassing the animal for the production of meat could enable greater access to sources of protein in

© 2014 guaRdian news & media

Rose believes there is potential for

Seaweed: This is a sustainable food source

Researchers are confident that, given the

the nozzle of a 3D printer and potentially

developing and emerging economies,” says

that “requires no fresh water, land or fertiliser

printed into any desired design, making

Brent Taylor, co-founder of Beyond Meat, a

to grow,” and is not susceptible to dirty

them available during a crisis.

company that is creating plant-based faux

soil like livestock is, says Dr Craig Rose, a

meat. “The production of animal meat in

marine biologist and founder of the Seaweed

could have a real impact on mass treatment

developing countries is extremely costly.

Health Foundation. It’s also very nutritious.

of malnutrition in refugee camps where

Furthermore, countries in regions such as

“It contains many minerals, trace elements,

food production demands aren’t always

sub-Saharan Africa import from abroad

vitamin groups and proteins,” he adds.

met,” says Kerr. n

“If the food can be printed quickly it

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42

Rebuilding the lego bRand bRick by bRick in 2003, lego was on the verge of collapse and was forced to sell off assets with venture capitalists ready to pounce on the company. ceo Jorgen Vig knudstorp was tasked with saving the company, and today lego is the world’s biggest toy company, reports Rupert Neate.

Portfolio

43

October 2014

Profile

44

T’S NOT THE SORT OF PLACE

a new 12,000 square-metre “hands-on

you have doesn’t mean you’re going to be

you would imagine one of the world’s

minds-on experience centre” called the

more creative, you can be very creative with

biggest companies might be based.

Lego House, being built on the site of

very few Lego bricks,” he said. “Out of this

There are no glass and steel towers

what was the town hall and Billund’s only

place something very extraordinary has

and no chauffeur-driven limousines.

shopping centre, until Lego bulldozed

grown, based on our fundamental values.

In fact, there are few roads and

it. When complete in 2016, the idea,

That is, of course, why we are celebrating

hardly any people. It takes just five

according to Kjeld Kirk Kristiansen, the

laying these foundation stones on the new

minutes to drive around the entire

grandson of Lego’s founder, is to provide

Lego House.”

town. Welcome to Billund, Denmark (population 6,194), home to Lego.

For a company known the world over for its plastic building blocks, which the firm boasts can be used to create just about anything as long as you’ve got enough imagination, the firm’s headquarters are distinctly unambitious.

Its long, squat brown building, on a suburban street opposite rows of residential bungalows, looks more like municipal offices than the global HQ of the world’s biggest toy company that makes an annual profit of $900 million – or about as much as Facebook. Lego has said it has sold on average 86 Lego bricks for every person on Earth.

Main entrance of the Lego group’s HQ in Billund, Denmark.

Chief executive Jorgen Vig Knudstorp has a corner office – the traditional

“one place where anyone can experience

aspiration of Wall Street executives – but

the Lego idea come true”, and is expected

his is on the ground (and only) floor and

to pull in 250,000 visitors a year.

has a view of the car park.

EARLY BUILDING BLOCKS

Lego employees – there are about

Lego’s multi-billionaire founding family

4,000 of them in the town – laugh if

still live in Billund. Kristiansen, the last

Legoland, on the other is the Lego office,

you ask if they live in Billund, as most of

family chief executive and Lego’s single

and behind it a Lego factory. In August,

them commute 120 miles a day by car

shareholder, is Denmark’s richest man,

the company laid the foundation stone

from Aarhus on the other side of Jutland.

according to Forbes magazine. But despite

– naturally a giant Lego-style brick – to

There is no railway station despite the

his estimated fortune of $7.3 billion, he

town boasting Denmark’s second-biggest

still lives in a “perfectly ordinary house on

airport, built at the behest of Lego’s

the edge of town”.

On one side of the headquarters is

founding family. The Lego Movie may have

Christiansen, a master carpenter, founded

$450 million at global box offices. But

the company in 1932 less than 100 metres

there’s no cinema in Billund to watch it.

from the new Lego House, almost by

Knudstorp, a boyish 45-year-old with

accident. When demand for his step

carefully tousled hair, who lives an hour’s

ladders and ironing boards collapsed in

drive away in the pretty coastal town of

the Great Depression, Christiansen turned

Fredericia, agrees that Billund is boring

to making toys .

but reckons the surroundings help spark The first wooden duck proved such a big hit that Ole Kirk Christiansen switched entirely to making toys using the brand name Lego.

Kristiansen’s grandfather Ole Kirk

been a worldwide hit making more than

Lego’s innovation.

“Many creative people are finding that

The toys, the first of which was a wooden duck, proved such a big hit he switched entirely to making toys using

creativity doesn’t grow in abundance, it

the brand name Lego, derived from the

grows from scarcity – the more Lego bricks

Danish “leg godt” meaning “play well”.

Portfolio

45

executive, ending more than 70 years of family owner-management, and the company sold off assets, including 70 per cent of its Legoland theme parks to US private equity firm Blackstone. The parks are now 70 per cent owned by Merlin Entertainments, which also owns London Eye and Madame Tussauds, and 30 per cent controlled by the Kristiansen family’s Kirkbi investment firm.

Knudstorp, a former McKinsey management consultant who had worked at Lego since 2001, was installed as president and chief executive and told to “take the best of past and really restore that The foundation stone for the Lego House was laid on 19 August.

and make that very core – the Lego brick – an operationally sound and profitable experience for the company again”.

“I don’t like stuff that can only go into one set, I want stuff that can be applied across sets. It’s a more real lego building experience.”

The Lego House has been designed to use the modularity of interlocking Lego bricks.

The first Lego brick rolled of the production line in 1949 and the company

Near collapse

Observers have said Lego’s near-demise was caused by it simply “forgetting about the brick”. Knudstorp bristles. “That’s a little bit unfair,” he said. “We still

started exporting in 1956. Lego is now sold in more than 130 countries, is making a big

By 2003 the company was on the brink

produced a hell of a lot of bricks. We were

push into China and Africa, and exports

of collapse and foreign venture capitalists

still a brick-based company, but it had

account for 99 per cent of sales.

were circling Billund ready to pounce.

become almost less fashionable inside the

Lars Fahrendorff, editor of local paper

company to be doing the core experience.

The company flourished under the

“You wanted to be doing all the new

control of Christiansen’s son Godtfred,

JydskeVestkysten, said the near collapse of

who joined the firm at 12. Kjeld Kirk

Lego was one of the darkest periods in the

stuff such as books, other media, and

Kristiansen took over in 1979. By the late

town’s history. “Many people could have

theme parks, and of course all the talent

1990s, however, the company had lost its

lost their jobs, it was a very scary thing for

and all the energy goes that way... All the

way – the result of a misguided attempt

people here,” he said. “If there was no Lego

management attention goes that way and

to become the world’s biggest children’s

in Billund, there will almost be no Billund...

you sort of forget about it [the brick].”

brand with haphazard expansion into

Lego is Billund, and Billund is Lego.”

dolls, clothes and books.

October 2014

In the end Kristiansen quit as chief

Knudstrop set about resurrecting the company. “I had a strong feeling that

Profile

46

Approximately 150 Lego designers work hard at developing new products.

the brand would survive because I got

says Knudstorp, whose favourite range is

so many letters from kids and other

the Lego Creator series. “And, of course it’s

consumers saying ‘please don’t die’. So I

the same from a manufacturing point of

knew the brand would survive, the only

view. I want elements that are universal,

question to me became: ‘was I and the

that gives me the best economics and best

team the right management?’”

utilisation of the mould.”

He cut thousands of jobs, and ditched

It means Lego’s army of designers

hundreds of products to focus on bricks.

are told to inventively recycle previous

He also halved the number of bricks

designs, meaning ninja blades double up

produced in order to cut

as windscreen wipers. Designers also have

costs and increase the

to seek special permission every time they

profitability of each Lego

want to make a new design.

element. It’s the design

One new piece Knudstorp did allow was

and manufacture of new

Marge Simpson’s hair. “You have to agree

models that costs Lego

that hair is pretty unique, right,” he said.

money, not the plastic

“So, if you make that you are never going

raw material that costs

to be using that again for any other theme

less than $1 a kilogramme

because people are going to say ‘why are

and sells for more than

you using Marge Simpson’s hair in Harry

$75 per kg in Lego sets.

Potter or just an ordinary Lego City set’.”

To break even each new design must achieve sales of $170,000.

Lego’s Ladies

“I don’t like

A counting machine at the processing facility in Billund.

“Nobody makes artistic products like that, nobody makes a movie and says there has to be equal numbers of men and women. it’s a more real Lego building experience.”

16 per cent of Lego characters are female, decreasing to just 11 per cent if you exclude

stuff that can

Knudstorp claims he has no idea what

only go into

proportion of Lego minifigures are female.

one set, I want

Given the ongoing furore surrounding the

number of minifigures needs to be an equal

gender of toys, in which Lego has played

amount to be gender neutral,” he said.

applied across sets.

a central role, you’d think he might have

“Nobody makes artistic products like that,

It’s a more real Lego

looked into it.

nobody makes a movie and says there has

stuff that can be

building experience,”

Gender activist group SPARK claims

the new female-friendly Lego Friends range.

“I don’t buy this premise that the

to be equal numbers of men and women.

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48

“It’s more about how you portray those figures. Are you respectful, are you stereotyping boys into always being policemen and stereotyping girls into being hairdressers or are you painting a much more balanced real life picture that children can identify with?”

He said Lego, which will soon have produced more minifigures than there are humans on the planet, is achieving just that, and the “positive reception of Lego worldwide shows that we are depicting them [girls] in a way that they find very aspirational and attractive”.

Knudstorp concedes that Lego Friends, a new range of more life-like Lego

Lego Friends is a new range of more life-like Lego designed specifically for girls.

designed specifically for girls, features

Dutch Geochemist Ellen Koojiman first submitted the idea for an all-female research institute to Lego Ideas Research Institute.

She managed to get 10,000 supporters for her proposal, a level that forces Lego designers to investigate the idea. a large proportion of female characters in hairdressers, beauty salons, shops and in

Knudstorp accompanied by children and local Lego employees at a Build the Change event in Jiaxing, China.

popular female scientists

managed to get 10,000 supporters for her

(which sold out its

proposal, a level that forces Lego designers

first production run

to investigate the idea.

in less than a week) were not Knudstorp or Lego’s idea.

Dutch Geochemist Ellen Koojiman first submitted the idea for

Knudstorp is also currently battling environmental activists over Lego’s partnership with oil giant Shell. A recent Greenpeace YouTube video, that went viral, showed a Shell oil rig made from Lego slowly sinking into an ocean of oil along with polar bears. But with Lego’s

bikinis at the plastic beach. And

an all-female research

revenue rising 11 per cent in the first half

Lego’s most non-stereotypical

institute to Lego Ideas

of the year, Knudstorp can afford not to

woman characters – the hugely

Research Institute. She

be too worried. ■ Portfolio

Media

50 Fans fill the Key Arena in Seattle for The International game tournament.

Internet Athletes, ImAgInAry

© 2014 New York Times News service

Professional video game competitions, widely known as esports, are attracting huge audiences and major sponsors, reports Nick Wingfield.

The contestants were gunning for a big

A bewitching creAture – hAlf

virtual world where they smite each other

woman, half deer – battles a shaman and

through keyboard and mouse clicks. Except

piece of the $11 million in prize money,

a sentient tree. Lightning bolts strike.

on this sunny day in July, every attack and

the most ever at a games tournament. And

Weapons explode. Nasty spells are cast.

counterattack by a five-person team set off

the game’s developer, Valve Corp., moved

an eruption of cheers – from the more than

another step closer to securing gaming’s

across the internet, transports teams of

11,000 spectators crammed into Seattle’s

legitimacy as a major-league spectator sport.

players from their bedrooms to a verdant

basketball arena.

The video game Dota 2, like so many

Having upended the entertainment Portfolio

51

sports, reAl Crowds Last year, the US State Department began

world – global revenue for games is $20

some attract at-home audiences larger than

billion higher than the music industry’s

those of top traditional sporting events.

granting visas to professional gamers, under

and is chasing that of the movie business

Madison Avenue’s highest fliers, like Coca-

the same programme used by traditional

– the games industry has turned its

Cola and American Express, have lined up

athletes. In August, web giant Amazon

ambitions toward the lucrative world of

as sponsors. Prize money has soared to the

announced it was buying Twitch, a hugely

professional video game competition,

millions of dollars, and top players earn

popular video streaming service used by

widely known as esports.

six- or seven-figure incomes and attract

gamers, for $970 million in cash.

The signs of success mirror the

big and passionate followings, luring a

“This stuff is expanding out of control,”

achievements of major sports. Game

generation of younger players to seek fame

said James Lampkin, a product manager

tournaments sell out giant arenas, and

and fortune as gamers.

for ESL (Electronic Sports League), one

October 2014

of the biggest esports leagues, which had 73,000 attendees at a four-day tournament in Katowice, Poland, in March. “We have no idea what the limits are.”

Game competitions have been around for

Teams of five battled for $11 million worth of price money at The International.

decades, but what was happening at that arena in July would have been unthinkable, even laughable, only a few years ago. As broadband internet access and free-to-play games have spread, gaming competitions have multiplied in size and frequency around the world, going beyond early strongholds like South Korea.

At the Seattle event, cheering fans, many dressed in costumes to look like

getty images

Media

52

game characters, hoisted national flags to show support for their favourite teams.

Commentators, known as casters, offered play-by-play. Confetti rocketed into the

one another. The site has also become a

Seoul, South Korea.

The roots of esports trace to the 1990s

lucrative source of revenue for gamers,

with the advent of fighting and shooter

who can make money through a mix of

games like Street Fighter and Doom.

advertisements, subscription fees and

watch esports over the internet or on

Tournaments in those days were humble

donations from viewers.

TV, according to estimates by SuperData

affairs, held in crowded hotel ballrooms in

Research. South Korea even has a TV

front of a few hundred people. Even the

basically,” said Seth Abner, 19, a professional

channel devoted largely to esports. A

winning players often lost money after travel

Call of Duty player, who streams his

championship tournament in October for

and hotel bills.

matches over a service operated by Major

crowd when the winners were crowned.

More than 70 million people worldwide

League of Legends, an arena battle game,

But with the number of participants

“Broadcasting to the internet is our job,

League Gaming. As professional gamers

streamed around the world, attracting

mushrooming, the internet has forged a

often practice on sites like Twitch, fans can

8.5 million simultaneous online viewers

tighter link between fans and players than

get behind-the-scenes peeks at practice

at its peak – the same as the peak

almost any other sport. Twitch, a website

sessions by their favourite players. The more

viewership for the deciding game of

started in 2011, lets players stream video of

generous ones even invite fans to play a

professional hockey’s Stanley Cup finals

their playing sessions over the internet from

round with them.

in June. This year, the League of Legends

PCs and consoles.

“Imagine if LeBron James and Michael

championship is expected to attract 40,000

More than 55 million people visited

Jordan, in every practice and every live NBA

to 50,000 attendees to a soccer stadium in

Twitch in July to watch and interact with

game, had a GoPro camera strapped to their

Members of Vici Gaming shout to one another during the finals of the Dota 2 tournament.

More than eleven thousand fans were at the Key Arena to watch the Dota 2 action.

Portfolio

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Media

54

English-language casters described

Peter Dager is captain of The Evil Geniuses, one of the world’s best Dota 2 teams.

offensives by the teams with the exuberance of Marv Albert during the NBA finals.

The soundproof booths did not stand a chance against the roars from the crowd.

“You can still hear the ‘USA’ chants,” said Peter Dager, captain of a Dota 2 team called Evil Geniuses, which is based in the United States and finished third in the tournament to a team from China, dividing up more than $1 million in prize money. “For a 22-year-old kid who lives at home, it’s very surreal.”

For the companies with a stake in the video game industry, the hope is that the huge audiences will attract more money from major marketers, which will in turn help elevate the production values of events.

Some of that is already happening. CocaCola live-streamed a League of Legends tournament to theatres in Europe and features the likenesses of game characters on soda bottles in South Korea.

“Gaming isn’t the kind of platform it was when we were kids,” said Matt Wolf, 45, a veteran of the games business who now leads Coca-Cola’s efforts to explore investments in gaming. “It’s a major mass media platform that now has multiple forms of consumption.”

The draw for marketers is the audience: mostly employed men, 18 to 35 years old, a group that has become harder to reach with conventional TV advertisements.

Major video game competitions and online

Top players can earn six- or seven figure incomes and attract a passionate following.

streaming sites offer companies new ways to find them.

chest and they had an earbud where they

SuperSonics, a franchise now in Oklahoma

can hear people ask direct questions and

City, used to patrol the floorboards.

occasionally answer it when they’re playing,”

On a stage at the front of the hall, two

Still, for the cycle to continue, the industry will most likely need to overcome some longheld opinions on games and gamers – in

said Dennis Fong, 37, an early professional

teams of five players sat in soundproof

particular, that the skills involved are inferior

gamer who is the new chief executive of

booths resembling greenhouses, a two-storey

to conventional forms of athletic excellence.

Raptr, a social network for gamers. “That

screen projecting a view inside the game.

level of access is unprecedented.”

Inside the booths, which are designed to

about such attitudes. The argument over

Lampkin of ESL said he wasn’t worried

prevent the teams from hearing details

whether professional gaming is a sport in

Prize money and slick producing

about enemy positions from the casters,

the traditional sense, he said, is beside the

have also added a dash of excitement to

players clicked their mice, barely moving in

point now.

esports matches. The Dota 2 tournament

their seats. Fans roared whenever a team

in Seattle in July took place in Key Arena,

achieved a triple-kill, launched an ambush

sports, that doesn’t mean anything to me,” he

a cavernous hall where Gary Payton and

or executed another deftly coordinated feat.

said. “That doesn’t change the reality of the

other basketball legends of the Seattle

Over loudspeakers in the arena, two

“If you don’t want to call it athletics or

massive growth we’re seeing.” n Portfolio

China

56

Renley Watch ManufactuRing co. is one of the companies that helped coastal southeastern China displace Switzerland as the centre of the world’s watchmaking industry. But now Renley, like many watchmakers, is mulling whether to move far into China’s interior.

States in China’s interior are wooing factories with cheaper land and labour, as well as other incentives reports Keith Bradsher.

watch industry executives and offered an enticing package for them to move their factories there, said Stanley Lau, Renley’s managing director. The incentives included deeply discounted land, less © 2014 New York Times News service

TempTing FacTories To move

In August, officials from Chongqing, a sprawling metropolis in western China, met with a group of

intrusive environmental inspections and lower wages.

When some of the executives expressed concern about moving costs, the answer came immediately.

“The government in Chongqing said, ‘Don’t worry. If you agree to move your factory to Chongqing, I’ll pay your moving costs,’” Lau said, adding that at least 10 watch factories were already preparing to move.

Portfolio

57

Chongqing is luring coastal factories to the interior with cheaper property, lower wages and other incentives.

Such meetings are increasingly common

“It’s really a problem. I think governments

a large Samsung smartphone out of his

as the Chinese economy gradually slows.

should not give money to companies for

suit pocket, Li described how 90 per cent

With foreign investment falling, inland

relocation,” said Li Chunhong, the top

of the phone’s components had been

provinces are in a cutthroat competition

economic policymaker in the southeastern

manufactured within a 97-kilometre-wide

to attract domestic industries, offering

province of Guangdong. “It violates the

circle near Hong Kong that encompasses

significant financial incentives to

transparency of the market.”

cities like Shenzhen, Dongguan and Zhuhai.

Li predicted that Guangdong would

“If a factory needs components, they

another in crucial areas like environmental

hold on to higher-wage jobs, particularly

can make a call, and in just one hour the

regulation. Companies, driven to cut costs,

in the electronics, design and software

components are sent to their factory,” he said.

are taking the offers seriously.

industries. Already enough high-tech

businesses and even undercutting one

companies are moving engineers and

GuanGdonG province led China

governments in the United States, which

other staff members into Shenzhen

in embracing capitalism in the late 1970s

have long used tax sweeteners to persuade

that the city has easily the strongest

and continues to rival the Shanghai

companies to relocate. And the trend in

commercial real estate market in China,

area as one of the country’s two main

China is infuriating the coastal provinces,

with office space in short supply, said

export hubs. Tens of millions of migrant

which contend that businesses should be

Sanjay Verma, the chief executive for

workers flocked from all over China to fill

deciding where to locate factories based

Asia at Cushman & Wakefield, a global

Guangdong’s factories, many of them built

on economic merits like the quality of

commercial real estate brokerage firm.

by Hong Kong investors. More recently,

The turf war echoes the efforts by state

ports and highways.

October 2014

Pausing during an interview to pull

Guangdong has been a leader in China in

China

58

Jean d’Eve, but most of the production is sold under other brands for retailers that do not have watchmaking operations.

Sitting in his company’s conference room, lined with display cases that glitter with expensive watches, Lau ticked off the pros and cons of moving his Dongguan factory 1,014 kilometres northwest to Chongqing. With an urban population of 17.3 million, Chongqing is building a “Jewellery City” and trying to persuade manufacturers to relocate there.

The appeal starts with lower wages.

Although pay in the Chinese interior is

GETTY IMAGES

rising fast, it has not quite caught up.

A worker assembles sauna components at a factory in Guangzhou.

Chongqing has assured watchmakers of an ample supply of workers, and Lau estimated that they would be paid $375 to $405 a month, excluding government-mandated costs for employers like basic health insurance, pensions and housing subsidies.

trying to tackle pollution by forcing many

That compares to $490 a month in

factories to install new equipment, move

Dongguan.

to outlying areas far from population

Chongqing also has abundant land.

centres or even close entirely.

The city charges one-third less than

Now, Guangdong is losing lower-wage jobs to inland provinces. Blue-collar

Dongguan, and the land is near large

workers are scarce across China, and

roads and commercial districts.

Environmental regulation is one of the

their wages are surging, because college enrolment has quintupled in the last

touchiest issues. Lau said that Chongqing

decade and few graduates will consider

required new factories to install modern

factory labour. With the jockeying over

pollution-control equipment and adopt

jobs, many migrant workers have been

certain procedures, but then had fairly few

able to stop taking 30-hour bus and train trips to coastal provinces and find jobs closer to home – leaving factories, in Guangdong particularly, scrambling for people to work on assembly lines.

New railroad routes from western

the Federation of Hong Kong Industries,

China to Europe, as well as sprawling

a broad coalition of trade groups with

new airports with freight terminals built

factories across southeastern China.

deep in China’s interior, are also making it possible to ship goods directly from inland

Lau’s company, which he founded

factories to foreign markets without

in Hong Kong in 1983, currently makes

relying on the giant ports of Guangdong,

watch components and assembles

Shanghai or other coastal areas.

less expensive watches in Dongguan,

“More and more manufacturers are

in Guangdong province. Renley also

considering relocating their production

assembles midmarket watches at a factory

operations from Guangdong to more

in Hong Kong and luxury watches in La

inland in China, or even to other countries,”

Chaux-de-Fonds, Switzerland. Renley has

said Lau, who is also the chairman of

brands like Buler, Temporis, Sultana and

The Blue-collar workers are scarce across China, and their wages are surging, because college enrolment has quintupled in the last decade and few graduates will consider factory labour.

Portfolio

follow-up inspections. Four Chongqing municipal agencies declined to comment on their activities.

Guangdong has been gradually reducing air pollution over the last several years partly by closing older factories and requiring new equipment and procedures for other sites. But for many industries with histories of pollution problems, like metal plating – an important part of watchmaking – Guangdong is also requiring that factories move to a few designated industrial zones.

Chongqing is an emerging hub for

A bridge under construction in Guangdong province, one of China’s main coastal manufacturing strongholds.

railroad shipments across Central Asia to Europe, said several executives who have operations in the city or are considering them. Hewlett-Packard already ships entire trainloads of computers along the “new Silk Road” route.

In a recent speech, Li, the economic policymaker for Guangdong, called for renewed emphasis on a “maritime Silk Road,” the ships that still haul the bulk of China’s commerce. Many freight executives are sceptical that transcontinental railroad routes spanning Asia and Europe would supplant container ships.

“We do not see it as an alternative replacing or denting the status of ocean shipping as the main mode of transport between the two continents,” said Jens Eskelund, the managing director at the

REUTERS

China

60

Watchmaking company Renley is considering relocating from Guangdong to Chongqing.

China division of A.P. Moller-Maersk, the

counterparts. But investment interest in

world’s largest container shipping company.

Southeast Asia has temporarily slowed following a spasm of anti-Chinese violence

Lau said that the watch industry still relied almost entirely on air shipments, so

in Vietnam last spring, when rioters

rail services were irrelevant.

destroyed hundreds of factories after a

Renley Watch has not made a decision on whether to move. Chongqing has offered this year to cover two million renminbi ($325,000) in moving expenses for each of the first 20 watch factories in Guangdong that agree to relocate.

Other cOuntries may not be viable alternatives for manufacturing. Workers in Vietnam and Indonesia are paid less than half as much as their Chinese

For many industries with histories of pollution problems, like metal plating – an important part of watchmaking – Guangdong is also requiring that factories move to a few designated industrial zones.

Chinese state-controlled company began drilling for oil off Vietnam’s coast.

“That was one of the problems we never predicted,” Lau said. “Nowhere in the world is safe – wherever you go, you have to take a risk.”

Another factor may yet motivate manufacturers like Lau to stay in Guangdong. “If we move to Chongqing, will my assistants and technicians come with us?” Lau asked. “We have to see.” n Portfolio

Technology

62

Storage WarS Cloud storage companies are having to adapt as tech giants such as Google, Amazon and Microsoft enter the fray, reports Quentin Hardy.

Aaron Levie, chief executive of Box, at the company’s headquarters in Los Altos, California.

Portfolio

63

NothiNg coNceNtrates miNds at a tech startup like living in the middle of a price war between Amazon and Google. Just ask executives at companies like Box, Dropbox and Hightail. They pioneered a new kind of internet service that allows people and companies to store all kinds of electronic files in an easy-touse online locker. But as often happens, the much bigger companies liked the idea so much they decided to do the same thing – at a much lower price.

“These guys will drive prices to zero,” said Aaron Levie, co-founder and chief executive of Box. “You do not want to wait for Google or Amazon to keep cutting prices on you. ‘Free’ is not a business model.”

So how do you avoid free? Box is trying

The advantage of storing data in the cloud is that it is available to multiple users and devices.

and get two gigabytes of storage capacity

like digital versions of X-rays for health

a month, the equivalent of 1,000 books

care companies and other tasks specific

or seven minutes of high-definition

the attention, data storage is every bit

to different kinds of customers. Hightail

television. A version for $10 a month

as important, particularly as objects like

is trying to do something similar for

offers 100 gigabytes.

phones, tablets, cars and thermostats

customers like law firms. And Dropbox? It

Hightail, which used to be called

While devices and apps get most of

become appendages of the internet.

is trying to make sure that its consumer-

YouSendIt, says it has more than a half-

Throw in trends like collaboration and

minded service stays easier to use than

million business customers paying $25

big data analysis, and all those bits of data

what the big guys provide.

a month or more, depending on the

become more dynamic than something

features chosen.

in a file cabinet. They are fluid and being

“It’s very tough just to be in the storage business,” said Brad Garlinghouse, chief

“There’s a place for all of them,” said

executive of Hightail. “We don’t think that

Amita Potnis, an analyst at IDC. “Amazon’s

is what we’re selling anymore.”

focus is really computing itself. The smaller

In the tech industry, they call this sort

ones have to focus on ways businesses

entered and retrieved from many points.

Managing all that data should be a good business.

The problem for everyone is price.

of reinvention of the core business model

actually use it.” For example, she said, the

Amazon and Google have for years

“pivot.” Another way to describe it is a

services can help companies collaborate

decimated competition in their respective

fight for survival.

with each other online instead of sending

fields of internet advertising and retail. As the two companies move to

Box, founded in 2005, has attracted $512 million in investment, and in March it filed papers for an initial public offering of stock. In July, the company said it had 39,000 businesses paying $15 to $35 a month a user. It is hard to know how many people that is, since some of the © 2014 New York Times News service

emails back and forth with attachments.

to cater to special data storage needs,

businesses have just a couple of people, and others include General Electric and Eli Lilly.

Dropbox has 300 million customers worldwide and actually runs inside Amazon Web Services, as do parts of Box. Many Dropbox customers pay nothing October 2014

The problem for everyone is price.

Amazon and Google have for years decimated competition in their respective fields of internet advertising and retail.

dominate cloud computing, including online storage, they are turning that relentlessness on each other.

In March, Google celebrated the unification of several cloud computing services with price cuts of 68 per cent for most customers, to 2.6 cents a gigabyte a month, about one-quarter the price of Dropbox’s premium consumer service.

Amazon’s Web Services, which had cut prices at least four times since 2008, responded with cuts of its own, including one cut to 2.75 cents a gigabyte for large

Technology

64

parts of Apple, along with operations at

Drew Houston is the chief executive officer and co-founder of Dropbox.

several large banks, run inside AWS, say people familiar with the service who spoke on the condition they not to be named so they could sustain relations with the powerful cloud company.

Amazon would not comment on confidential customer agreements. An Apple spokesman noted that Apple had its own data centres in four locations in the United States and said “the vast majority” of data in services like iTunes, maps and the App Store ran on its own computers.

Apple uses other facilities as well, he said.

Google does not have anything like the

getty images

Amazon customer list, but its computer network is probably the largest corporate network in the world. It includes custommade computing and power systems and several thousand engineers to keep it running. According to one person with knowledge of the system, Google spends about $2 billion a quarter on its computing infrastructure.

Google would not comment on its costs. In an email, Tom Kershaw, a product manager for Google’s cloud service, predicted more cost-cutting. “As more customers store more information, for longer, we’re able to make gains in efficiency and pass these savings along to the customer.”

getty images

Both Box and Hightail now say they assume that they will offer customers Brad Garlinghouse, the chief executive officer and chairman of Hightail, is reinventing the company’s core business.

amounts of storage, and just a penny a

typically cost $120,000 and weighed 249

month for data used less frequently. It

kilograms. Today, Amazon’s cloud-based

has made further price cuts on other

storage might cost 12 cents a year.

types of storage since then. Many expect

None of the smaller online storage

Microsoft, which runs its own big cloud

companies doubt that Amazon and Google

business, called Azure, to follow with

can make seemingly impossible pricing

similar cuts.

moves. Both companies also have a scale that means even the tiniest profit can be

EvEn by the standards of computing,

huge. Amazon’s Web Services (AWS) brags

where services seem almost invariably

that almost all of Netflix, and Amazon

to become cheaper and faster, storage

itself, is inside its cloud, along with

prices have had an exceptional fall. The

hundreds of other substantial companies.

first gigabyte storage device in 1980

Apple’s iCloud storage service and other

None of the smaller online storage companies doubt that Amazon and Google can make seemingly impossible pricing moves. Both companies also have a scale that means even the tiniest profit can be huge.

Portfolio

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Technology

66

unlimited storage free and push their costs into the prices they charge for other services.

Servers

“At this point, it’s better just to say ‘unlimited,’” Levie said. “The thing to do is take into account why someone is storing something online and what their needs are.”

Application

Laptops 50

Box has hired people with specialties

5 4 3 2 1 0

in health care, media and entertainment,

6 7 8

40

60

80 90

30

100

20

E

F

110

10 0

120

12345

NE WS

Monitoring

hospitality and retailing. Dropbox still has

Desktops

70

Collaboration Communication

Content

supposed limits on storage in its business

Finance

Platform

offering, but they start at a terabyte, or 1,000 gigabytes, and customers can upgrade from there with seemingly no fee.

Identity

This niche approach could work,

Object Storage

provided the big companies do not go

Runtime

Queue

Database

Infrastructure

after these industry-specific storage markets or build more consumer-friendly service offerings. Levi said he thought that

Compute

was unlikely. “No one is going to build Google Health Care,” he said.

Phones

Block Storage

Network Tablets

Google’s Kershaw differed. “Industryspecific solutions are the wave of the future and a key part of what Google is

Servers and hard drives inside IBM’s Softlayer cloud data centre in Dallas.

getty images

building for our customers,” he said. n

Cloud Computing

Portfolio

AUSTRALIA

|

NEW ZEALAND

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INDONESIA

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M A L AY S I A

|

MONGOLIA

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NIGERIA

|

GHANA

Real Estate

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SpeculatorS

Bet on

New capital

Andhra Pradesh needs to build a new capital after India split the state in two, leading to rampant land speculation, reports Nida Najar.

the middle of nowhere seem an unlikely

the fertile Krishna River delta, much is

spot for a speculation boom. But in June,

it have the advantage of being just

as it has been for generations: The cotton

after years of impassioned debate, India

outside Vijayawada, where land holdings

soil is as black, the mango trees as heavy

split Andhra Pradesh, a large state in

are dominated by the caste to which

with fruit, the tobacco fields as fragrant

southern India, in two, creating India’s

the business-friendly chief minister

and deeply green as ever.

29th state, Telangana.

Chandrababu Naidu belongs. Naidu –

But there have been curious changes

The new state will keep the ancient city

who has earned global fame through pro-

in recent months. An old temple has

of Hyderabad as its capital, so what is now

market policies, which are credited with

received an expensive renovation,

Andhra Pradesh will eventually need a

building Hyderabad into the information

complete with a new banquet hall,

new capital, and these tiny villages could

technology metropolis it is today – has

courtesy of community donors. Some

end up on the outskirts of what might be a

hinted to local media that the capital

plots once tilled by small farmers lie

sprawling new city.

will be somewhere in the stretch of

untended, nothing more than overgrown

In India, the politically connected seem

Vijayawada and Guntur.

grazing fields for cattle. Locals say

to have a knack for buying land at just

Opposition to this plan emerged in

“For Sale” signs have been replaced by

the right moment. Privy to government

late August when an advisory committee

“No Sale” signs as farmers try to fend off

decisions about zoning or development,

recommended several alternative locations

a rush of buyers who seem to have

they are often accused of acquiring land

to the central government, according to

appeared overnight.

near a planned development or using

local reports.

As for who the buyers are, theories abound. At markets and at tea-side stalls, © 2014 New York Times News service

Agiripalli and the villages surrounding

In the belt of vIllages near

people rattle off the names of politicians

clout to get land rezoned, ending up with a windfall.

In Andhra Pradesh, the location of the

Ram Babu Nardala, 31, a mango and rice farmer, has positioned himself as the village real estate broker in recent

who reportedly visit late at night to survey

new capital has become an opportunity,

months, an intermediary between

a property undetected. They wonder if

especially in and around the 40-kilometre

farmers and shadowy buyers from town.

the recently retired cricket hero Sachin

stretch between two towns: the trading

Nardala does not know if this expanse of

Tendulkar really bought 40 hectares in a

town of Vijayawada and the tobacco

fields will become the new capital, but

nearby town, as the newspapers say.

fields near Guntur, each strongholds of

he does know that business is good. He

politically connected castes.

spends his mornings managing his crop,

At first glance, these mango groves in

Portfolio

69

getty images

Officials from the recently formed southern Telangana state celebrate India’s 68th Independence Day at Golkonda Fort in Hyderabad.

October 2014

Real Estate

70

then drives his new sport utility vehicle,

and illegal construction of housing and

with the chief minister’s party flag on the

apartments on land zoned for agriculture.

hood, to a small pillared shack nestled

For years, emotions dominated the

among banyan trees that line the main

debate over whether to split Andhra

road. This unassuming space is the spot

Pradesh. It was a battle of haves and have-

where many real estate deals in the

nots that drove activists from the poorer

village are negotiated.

Telangana region to set themselves on fire,

“I have a circle of people in Vijayawada,”

politicians to fast for days and poets to

he said, periodically reaching into

write verses in favour of a separate state.

his jeans pocket to quiet his ringing

Politicians from the relatively prosperous

cellphone, “and I keep getting offers.”

coastal area of Andhra Pradesh opposed

He recently oversaw the sale of half

the split – in anticipation, some have suggested, of the loss of hefty revenues

brother-in-law and said the deal brought

from Hyderabad – and literally came to getty images

a hectare of farmland belonging to his in nearly $180,000 from a Vijayawada buyer he would describe only as a businessman. “If you’re farming on it,” he

blows in parliament in February with those backing the bill for the split.

For Andhra Pradesh, which will need an

Chandrababu Naidu, chief minister of Andhra Pradesh, is known for his pro-business stance.

influx of industry after losing Hyderabad,

Many say that the beneficiaries of

Nor will the government benefit, since

represents an imperfect opportunity. “I

the speculation are not likely to be the

it misses out on crucial tax revenue by

know for a fact that politicians are buying

farmers, who sell for relatively low prices.

turning a blind eye to off-the-book sales

land there,” said Anant Maringanti, the

said, “you won’t even earn 50,000 rupees,” or around $800.

the Vijayawada-Guntur corridor

director of Hyderabad Urban Lab, an

And despite the optimism, a bubble is a bubble, even for locals unfamiliar with the term. One resident compared the astronomically rising land prices to a pot of milk on the burner: quick to boil up, and, once the heat dies down, just as quick to vanish into nothing.

urban research programme. “They’ll build real estate or high-value apartments. I don’t know if that’s really going to jumpstart the economy.”

And despite the optimism, a bubble is a bubble, even for locals unfamiliar with the term. One resident compared the astronomically rising land prices to a pot of milk on the burner: quick to boil up, and, once the heat dies down, just as

The Charminar is one of Hyderabad’s best known landmarks.

The city is the capital of the newly-formed Telangana state.

quick to vanish into nothing.

“There has been no government announcement,” said Ponnaiah Krupam, a mango farmer with four hectares of land and a small store near the main road. “I don’t understand what’s happening. I’m too afraid to sell.”

Land prices just outside the district’s bustling headquarters, Vijayawada, are rising more dramatically still. Lagadapati Rajagopal, a former Congress Party parliamentarian from Vijayawada

getty images

who earned his fortune through construction and his notoriety through using pepper spray during a particularly contentious parliamentary hearing on the Portfolio

Real Estate

72

getty images

Women harvest cotton in the fields of Andhra Pradesh.

Hyderabad’s metro is one of India’s biggest infrastructure projects.

split, views its aftermath with something akin to amusement.

His company’s name is emblazoned on billboards and roundabouts throughout Vijayawada. As a member of parliament in 2007, he oversaw the development and plotting of 60 hectares of farmland near town. The land value was around $5 million, he said. A year ago, he could imagine its value at close to

Speculators are buying up farmland around the town of Vijayawada.

$100 million. Today, with the speculation over the capital, he cannot imagine its price. “It’s good for farmers, and it’s good for the government,” Rajagopal said. “You can sell part of your land and still make a killing.”

professional class he is betting will flock to

How good rampant speculation will

the area. More than half of the plots have

be for farmers in Agiripalli and for

been sold, but so far, the frame of just one

the development of the state remains

house has been built, little more than a

to be seen.

roof supported by wooden beams in a vast

Hari Babu Matcha, a farmer near

field of numbered, empty plots.

Matcha expressed ambivalence about

Matcha expressed ambivalence about a sweeping change in the region, as do many other farmers, even though he expects to benefit from it.

a sweeping change in the region, as do many other farmers, even though he Agiripalli, has invested in a change. He is

expects to benefit from it. “First they

now in the business of plotting land. He

developed Hyderabad, and Telangana

and a group of partners have bought five

farmers were totally corrupted,” he said,

hectares of paddy in Agiripalli, planted

citing an influx of five-star hotels and a

grass in its place, installed a paved road

wave of farmers buying new cars, drinking

and a gate, distinguishing it from the

away their days.

surrounding rice fields. He hopes to see it

“Now, this disease will affect our soil,”

become a gated community of 300 houses

he said, then added, after a pause, “but it

for government employees, teachers and a

depends on the capital.” n Portfolio

Energy

74

getty images

Renewable EnErgy ThrEaTEns Utilities

Wind turbines at the Bharat Light & Power Ltd. Amberi wind farms in Maharashtra, India.

Portfolio

75

Electric utility companies are becoming nervous as countries such as Germany generate increasing amounts of renewable energy, which threatens their long-established business plans, reports Justin Gillis.

Of all the develOped natiOns, few have pushed harder than Germany to find a solution to global warming.

And towering symbols of that drive are appearing in the middle of the North Sea. They are wind turbines, standing as far as 100 kilometres from the mainland, stretching as high as 60-storey buildings and costing up to $30 million apiece. By year’s end, scores of new turbines will be sending low-emission electricity to German cities hundreds of kilometres to the south.

It will be another milestone in Germany’s costly attempt to remake its electricity system, an ambitious project that has already produced striking results: Germans will soon be getting 30 per cent of their power from renewable energy sources. Many smaller countries are beating that, but Germany is by far the largest industrial power to reach that level in the modern era. It is more than twice the percentage in the United States.

Germany’s relentless push into

© 2014 New York Times News service

renewable energy has implications far

October 2014

beyond its shores. By creating huge demand for wind turbines and especially for solar panels, it has helped lure big Chinese manufacturers into the market, and that combination is driving down costs faster than almost anyone thought possible just a few years ago.

Electric utility executives all over the world are watching nervously as technologies they once dismissed as irrelevant begin to threaten their longestablished business plans. Fights are erupting across the United States over the future rules for renewable power. Many poor countries, once intent on building coal-fired power plants to bring electricity to their people, are discussing whether they might leapfrog the fossil age and build clean grids from the outset.

A reckoning is at hand, and nowhere is that clearer than in Germany. Even as the country sets records nearly every month for renewable power production, the changes have devastated its utility companies, whose profits from power generation have collapsed. A similar pattern may well play out in other countries that are pursuing ambitious plans for renewable energy.

Some US states, impatient with legislative

getty images

Energy

76

gridlock in Washington, have set aggressive goals of their own, aiming for 20 or 30 per cent renewable energy as soon as 2020.

The word the Germans use for their

German Economy Minister and Vice Chancellor Sigmar Gabriel visits the offshore windfarm Baltic One near Barhoeft.

plan is starting to make its way into

Reid, an Irish financier working in

put the finishing touches on spacious new

conversations elsewhere: energiewende, the

Berlin on German energy projects. “The

homes. They looked like many others going

energy transition. Worldwide, Germany

Germans call it a transformation, but to

up in Orange County, south of Los Angeles,

is being held up as a model, cited by

me it’s a revolution.”

but with an extra feature: Lennar Corp.

environmental activists as proof that a

The potential payoff for getting the

was putting solar panels on every house it

transformation of the global energy system

new rules right is enormous: a far greener

built. The prices of the panels have plunged

is possible. But it is becoming clear that

electricity system that does not pump as

70 per cent in the past five years. That

the transformation, if plausible, will be

much greenhouse gas and other pollution

huge decline means solar power is starting

wrenching. Some experts say the electricity

into the atmosphere. Yet as the German

to make more economic sense, especially

business is entering a period of turmoil

experience shows, the difficulties of the

in parts of the United States with high

beyond anything in its 130-year history.

transition are likely to be enormous, too,

electricity prices.

Taking full advantage of the possibilities

and it is still far from clear whether the

may require scrapping the old rules of

system can be transformed fast enough to

The shifTing economics can largely be

electricity markets and starting over,

head off dangerous levels of global warming.

traced to China, by way of Germany. Over

industry observers say – perhaps with

“I am convinced that wind and sun will

the past decade, the Germans set out to

techniques like paying utilities extra to

be the central sources of energy, not only

lower the cost of going green by creating

keep conventional power plants on standby

in Germany but worldwide,” said Patrick

rapid growth in the once-tiny market for

for times when the wind is not blowing and

Graichen, who heads a think tank in

renewable power.

the sun is not shining.

Berlin, Agora Energiewende, devoted to

Germany has spent more than $140

studying the shift. “The question is: How

billion on its programme, dangling

acknowledged the need for new rules,

can we turn the energy transition into a

guaranteed returns for farmers,

though it has yet to figure out what

success story?”

homeowners, businesses and local

The German government has

they should be. “It’s pretty amazing what’s happening, really,” said Gerard

One recent day, under a brilliant California sun, saws buzzed as workers

cooperatives willing to install solar panels, wind turbines, biogas plants and other Portfolio

Energy

78

sources of renewable energy. The plan is

Some of the innovations they

In fact, the problems with the

paid for through surcharges on electricity

energiewende have multiplied so rapidly

recommend are already in use to

bills that cost the typical German family

in the past couple of years that the

some extent – pioneered in the United

roughly $280 a year, though some of that

government is now trying to slow down

States, with Germany avidly studying

has been offset as renewables have pushed

the transition. “I think we need a little bit

them. They include regular payments

down wholesale electricity prices.

of time,” said Jochen Flasbarth, a deputy

to persuade utilities to keep some fossil-

minister of the environment.

fuel power plants on standby for times

The programme has expanded the renewables market and created huge

when renewable sources lag. “It’s like a

As renewable energy sources start to cause gyrations in power supplies

retainer you pay your lawyer to keep

of solar panels doubling about every 21

and prices, experts contend that

her around in case you need her,” said

months over the past decade, and prices

clever new market rules could keep the

Jay Apt, an electricity expert at Carnegie

falling roughly 20 per cent with each

costs reasonable.

Mellon University. n

economies of scale, with worldwide sales

doubling. “The Germans were not really buying power – they were buying price decline,” said Hal Harvey, who heads an energy think tank in San Francisco.

POWER FROM RENEWABLES Germany may get 30 per cent of its electrical power this

year from renewable sources, including solar panels, wind turbines, dams and the burning of plant material. Here is how 10 of the largest economies used renewables in 2012.

POWER GENERATED FROM NUCLEAR AND FOSSIL FUELS

The ripple effects drove some US panel manufacturers out of business, prompting complaints about Chinese government

80%

60

created an opportunity for US homeowners and for companies like Lennar.

20

Coal

subsidies to the manufacturers who seized much of the market. But the decline also

40

Natural gas

France Japan

power prices, are high. Solar power, even a small amount, could be especially

German utilities are warning – or pleading, perhaps – that the revolution cannot be allowed to go forward without them. And outside experts say they may have a point.

The Achilles’ heel of renewable power is that it is intermittent, so German utilities

80%

Hydropower Biofuels and waste

Solar, wind, tide, geothermal

United States

disruptive, shaving wholesale prices during

most profitable times of day. The big

60

India

when demand for power, and therefore

have crashed during what were once the

40

Russia

make a lot of their money at times of day

about 10 per cent, wholesale power prices

20

Brazil

China

companies that generate electricity. They

seven per cent of power and wind turbines

0

Germany

Nuclear

power spells potential trouble for

In Germany, where solar panels supply

0

Canada

Oil

The decline in the cost of renewable

those peak periods.

POWER GENERATED FROM RENEWABLE FUELS

South Korea Source: International Energy Agency

Roman Rodriguez and Benito Olguin install solar panels atop a new home in a Lennar housing development N.Y. Times News in Irvine, California.

THE NEW YORK TIMES

Service

Date: 09/16/14 Graphic Slug: ENERGY GILLIS NSPR Size: 4.5 x 3.5 With Story: BC-ENERGY GILLIS NSPR-NYT

have had to dial their conventional power plants up and down rapidly to compensate.

The plants are not necessarily profitable when operated this way, and the utilities have been threatening to shut down facilities that some analysts say the country needs as backup.

Portfolio

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Essentials

81

The besT of leisure and lifesTyle

There is a lot to see and experience in Manchester ranging from football and music through to the Industrial Revolution and architecture, reports Andrew Marshall.

Manchester by

PHOTO: Mick cOOksOn

CAB October 2014

Essentials

Travel

PHOTO: Mick cOOksOn

“This is my city”– Taxi driver and tour guide John Consterdine on top of a building at Salford Quays.

PHOTO: Andrew MArsHAll

The National Football Museum contains more than 140,000 pieces of football memorabilia.

Welcome to manchester,” says taxi driver and tour guide John Consterdine, as I hop into the back of his classic looking black cab outside Victoria Station, one crisp February morning. “We have a lot to see today. In fact, I will be taking you on a 2000

want to show visitors the different aspects of

”There are two things that people generally assume about taxi drivers; that they know the city like the back of their hand and are not easily lost for words. I’m proud to say that both of these are true of me.”

Manchester and how they mesh together to make it whole.”

Our first port of call is Chetham’s Library, situated in the medieval quarter just a stone’s throw from Victoria Station.

Chetham’s was founded in 1653, making it the oldest free public reference library in the English-speaking world. The extensive

year journey from Roman times, through the medieval and industrial periods, then bang up to date with Media City and some

One Angel Square.

Fifty-two-year-old John is Manchester’s

music, football and stunning architecture

only qualified green badge guide and black

thrown in for good measure.”

cab driver and was awarded with ‘Tourism

John gets his tour underway by pointing

Star of the Year’ at the Manchester Tourism

out a few places of interest in the vicinity

Awards in 2013. John has a natural charm

of Victoria Station, including the National

and a genuine passion for the city where he

Football Museum (containing over

grew up, lives and works. “There are two

140,000 items of football memorabilia),

things that people generally assume about

the Arndale Centre on Market Street (the

taxi drivers; that they know the city like the

second busiest shopping street in the

back of their hand and are not easily lost for

country after London’s Oxford Street), the

words. I’m proud to say that both of these

Printworks (once the largest print works in

are true of me,” he says with a smile.

Europe and now repurposed as a popular

“Some people have this preconceived idea

entertainment complex) and one of the

of Manchester as a grim northern city but

planet’s most sustainable large buildings at

this couldn’t be further from the truth. I

PHOTO: Andrew MArsHAll

82

The Manchester United Trinity of George Best, Denis Law and Bobby Charlton outside Old Trafford.

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83

Chetham’s Library is the oldest free public reference library in the Englishspeaking world.

collections consist of a wealth of early printed books, manuscripts, diaries, letters,

PHOTO: Andrew MArsHAll

PHOTO: Andrew MArsHAll

The Printwork’s is a popular Manchester entertainment complex.

most nights of the week.

From the Northern Quarter we drive

is constructed in a different style from Italian Renaissance, Elizabethan, French

deeds, prints and glass lantern slides.

to Portland Street, just off Piccadilly

Renaissance and Flemish with roof

Chetham’s was the meeting place of Karl

Gardens to the top level of a high-rise

pavilions featuring large Gothic wheel

Marx and Friedrich Engels when Marx

car park to view one of Manchester’s

windows. The Grade II listed building

visited Manchester during the mid-1800s,

premier architectural buildings – the Watts

narrowly avoided demolition in 1972,

and it’s fascinating to view the economics

Warehouse built in the mid-1800s for

and today thrives as the Britannia Hotel,

books that Marx was reading at the time

S & J Watts. This ‘Queen of Manchester

retaining many of its original features like

and sit at the window table where Marx and

Warehouses’ once housed the largest

the balconied stairway.

Engels would meet.

wholesale drapery business in the city and

Next on the schedule is the trendy Northern Quarter, where John points out some of his favourite watering holes like the

“Only a few minutes walk away from

people came here from all over the globe to

here is the Gay Village and Chinatown

place orders for cotton goods.

which gives Manchester a friendly and

Each of the five storeys of the building

international flavour,” says John. “Further

Hare & Hounds and the Millstone. “These are typical Manchester pubs where you bump into your mates after work”, he says.

“And when it comes to food, I’m a regular at Williams Sandwich Bar which serves brilliant homemade soups, especially the pea and ham.”

Since it was rejuvenated in the 1980s the Northern Quarter has been Manchester’s alternative music, fashion and café culture hub. The main artery, Oldham Street, is where the pick of the establishments are PHOTO: Andrew MArsHAll

located such as legendary Afflecks Palace, a sprawling emporium bursting with retro and vintage fashion, the Vinyl Exchange (dealing in secondhand records and CDs) and the Night & Day Café where drinks are served in teapots and live music happens October 2014

The Northern Quarter is Manchester’s alternative music, fashion and café culture hub.

84

Essentials

Travel

afield is the Midland Hotel, a great place

Dragon’s Den is filmed here, and shows me

for afternoon tea, where Mr Rolls met Mr

the ‘Peeps’, a series of peep holes into some

Royce and the rest is history.”

of the buildings that provide glimpses into

Antique books inside Chetham’s Library.

PHOTO: Andrew MArsHAll

Back in the cab, I ask John how he made the transition from taxi driver to tour guide. “It was a natural progression

the past, including a mill interior that has been closed up since the Second World War. We stop for lunch at the nearby Crusty

really,” he says. “I noticed my taxi customers

Cob, a well-known favourite among taxi

asking questions about various places as we

drivers, where John regularly brings his

travelled around, so I found myself buying

tour clients. As we enjoy the famous meat

books and reading up on the city so I could

and potato pies, he tells me more about his

provide some answers. I also went on a

life as a tour guide. “I have clients from all

tour guiding course where I learnt about

over the world from Ecuador to Australia

Manchester’s importance in world history

and locals too, who are surprised with what

when it comes to areas like free trade, the

they discover on their doorstep,” he tells me.

canal system and the Industrial Revolution.”

“Most of my tours are around two hours in

John then drives down King Street,

length but sometimes longer like today. You

formerly the centre of the north-west

will find as we go around, that you will want

banking industry and now progressively

to spend longer at some points of interest

dominated by upmarket restaurants and

than at others. I might build a break in here

designer stores such as Liam Gallagher’s Pretty Green and Rio Ferdinand’s Rosso Restaurant & Bar, to arrive at Castlefield

PHOTO: Andrew MArsHAll

– the industrial and Roman heart of

Down by the canal at Castlefield.

Manchester. This fascinating inner city conservation area located at the south-west end of Deansgate, is home to the Roman era fort of Mamucium or Mancunium (which gave its name to Manchester), the terminus of the Bridgewater Canal (the world’s

Media City at Salford Quays.

first industrial canal built in 1764) and the world’s first passenger railway which terminated here in 1830 at Liverpool Road

In the last couple of decades there’s been a period of substantial regeneration at Ancoats with many of the great mills converted into apartments and offices.

railway station.

Ancoats is our next stop and another

and there so I can socialise with my clients,

significant first. Hailed as the world’s first

as I’m interested in their lives and what

industrial suburb, with its concentration

brings them to Manchester.”

PHOTO: Andrew MArsHAll

of mill buildings (including the oldest steampowered mills in the world), Ancoats

“With Manchester having two

is an important landmark in the history of

of the leading teams in England, next

the Industrial Revolution, when Manchester

on the tour is some football,” says John,

became known as ‘Cottonopolis’. For many

as we set off towards Eastlands, where

years from the late 1700s onwards, Ancoats

I wander around Manchester City’s

was a thriving industrial area until suffering

impressive Etihad Stadium soaking up the

an economic decline in the 1930s due to a

atmosphere. Currently under development

slump in the cotton industry.

on derelict land adjoining the stadium is

In the last couple of decades there’s

the Etihad Campus, that once completed

been a period of substantial regeneration

will be one of the most expensive sporting

at Ancoats with many of the great mills

complexes on the planet. This ultra-

converted into apartments and offices.

modern, state-of-the-art football and

John mentions that the popular BBC series

training facility will consist of 16 football Portfolio

85

university is the Manchester Museum that

on the walls. “From Joy Division and New

is well worth a post tour visit (entry is free)

Order to Oasis and the Smiths, Manchester

with dinosaurs, Egyptian mummies and live

is a place renowned for creative music,” says

animals on show.

Leslie Holmes, the club’s project manager.

A ten-minute drive from Oxford

“The Smiths Room is the third most visited

Road and the cab is heading up Sir Alex

music site in England after the Cavern and

Ferguson Way and Sir Matt Busby Way

Abbey Road.”

(commemorating the two great Red Devils’

In addition to his ‘Signature Manchester

managers) to Manchester United’s stadium

Tour’ John also offers specialist tours such

Old Trafford – the ultimate pilgrimage

as a Music Tour, Football Tour, Industrial

for fans worldwide. The great footballing

Buildings Tour, Pub Tour and Coronation

triumvirate of Best, Law and Charlton in

Street Tour, and he can also devise one

the form of bronze statues watch over the

specifically for your interests. The cab itself,

famous stadium where tours are available

which seats five and is fully accessible is a

and the chance to pick up the latest team

big part of the tour experience.

shirt at the club megastore.

From football to music and John parks

My own tour with John is drawing to a close at Salford Quays – Manchester’s new

the cab on the real-life Coronation Street

waterfront destination featuring an eclectic

in Salford, where the only thing missing is

and exciting mix of businesses and places

some washing strung across the cobbles.

of interest, from the BBC and ITV at Media

At one end of the street is the Salford Lads

City to the L.S Lowry Museum displaying

pitches (some with different types of

Club (a volunteer run recreational club that

works of the painter famous for depicting

surface to replicate pitches of other teams),

has been going strong since 1903), with

scenes of northern industrial life.

a 7,000-capacity stadium for youth team

a virtually unchanged interior of original

matches, a new sports centre and a hotel.

fittings including a boxing ring, snooker

take a lift to the rooftop of a nearby

A handful of football pitches away from

Two Smiths fans outside the Salford Lads Club.

We briefly explore the area and then

rooms and a gym with viewing balcony.

building, where with outstretched arms

the Etihad Stadium is the National Cycling

The club gained international fame in 1986,

John proudly announces: “This is my city

Centre and Velodrome (home to the British

when Mancunian band The Smiths fronted

– just look at that for a view.” As I take in

Cycling team) and the indoor BMX Arena.

by Morrissey, posed in front of the building

the 360-degree panorama, he points out

“You won’t want to leave the Velodrome

for the inside cover of their album The

some of Manchester’s classic landmarks:

once inside,” says John, and he’s not wrong

Queen is Dead.

Strangeways Prison, Manchester Ship

– it’s strangely hypnotic watching cyclists

A former weights room inside the club

Canal, Old Trafford, the Imperial War

go round and round on a track that is much

is now ‘The Smiths Room’ – a shrine to the

Museum and the new Coronation Street

steeper in reality than it looks on television.

influential 1980s band where, along with

set – it’s a fitting setting and finale to a

Bikes are available for hire if you want to

memorabilia, hundreds of photos of fans

top-notch tour of Manchester by a top-

experience it all for yourself at a later time.

outside the iconic entrance are displayed

notch bloke... n

From Eastlands, it’s back to the city centre to visit a point of interest with a more educational flavour. “The University of Manchester with its 40,000 students, some coming from all over the world adds to the city’s cultural diversity,” says John as we arrive at the main campus on Oxford Road. Here’s a few interesting facts about dates back to 1824: Twenty five Nobel Prize winners have worked or studied here, it’s where the nuclear atom was split by Ernest Rutherford in 1917 and the first stored computer was run in 1948. Located at the October 2014

Canal boats at Castlefield.

PHOTO: Andrew MArsHAll

this top research and learning facility that

86

Essentials

Culture

Pedestrians pass a large advertisement for mooncakes.

The Business of Mooncakes Mooncakes are a staple of the Chinese Mid-Autumn Festival, and just like fruitcakes in the West, they are both loved and loathed, reports Joyce Lau. Portfolio

getty images

87

Exquisite packaging is central to mooncake sales.

Mid-Autumn Festival staple with flavours

each. Environmentalists lament their

like chocolate ice cream and Ibérico ham,

elaborate packaging, which is discarded

traditionalists flock to Lin Heung. The

as soon as they are given – or, often,

classic gift box – four cakes with white lotus

regiven. According to Green Power, an

seed paste and two salted duck egg yolks –

environmental organisation, Hong Kong

costs 208 Hong Kong dollars, or $27.

alone throws out one million mooncake

“I buy them as gifts,” Yuen, a Hong Kong

© 2014 New york times News service

housewife in her 60s who identified herself

A

t the Lin heung tea House in Hong Kong, staff

boxes and more than 1.5 million mooncakes a year.

only by her last name as is the custom for

The Chinese authorities have long

some people in China, said as she stuffed

criticised the use of mooncakes. Last

cakes into her bag. “Plus they are good

year, they banned officials from buying

to eat. I know that Lin Heung uses real,

mooncakes with public money. They

authentic ingredients.”

even set up a “special tip-off window”

Like fruitcakes in the West, mooncakes

members rushed around with

are a popular seasonal gift that everyone

piles of mooncakes in their

loves to hate. The original, centuries-old

for internet users to report lavish government spending on mooncakes.

According to a report by China

trademark gold, blue and red tins. “Salty or

recipe – ground-up seeds, hard-boiled yolks

Daily, the state-run newspaper, Wang

sweet? How many egg yolks?” Mak Ling-

and a lard crust – has fallen out of favour

Qishan, head of the Communist Party’s

Hung, the bakery manager, shouted down

with younger consumers, who turn up their

anti-corruption body, “criticised the

the line. During the lunch rush in early

noses at a cake about the size, and nearly

Chinese tradition of giving mooncakes,

September, there was hardly room to stand

the density, of a hockey puck.

which he said creates opportunities for

because of all the people buying mooncakes.

While other retailers have reinvented this

October 2014

Nutritionists warn that the sweet varieties weigh in at 1,000 calories

corruption to occur.” The report also noted that “cellphones, jewellery and

Essentials

88

Culture

money are often hidden inside mooncake boxes or baskets.”

Still, they are big business. Industry groups estimate that mooncakes bring in $2 billion in annual sales in greater China.

Some Hong Kong companies have worked to reinvent the food. In the time leading up to the Mid-Autumn Festival, or Moon Festival, which celebrates the harvest and fell on September 8 this year, they have broadcast celebrity-studded ad campaigns and offered a range of non-traditional flavours.

Maxim’s, a regional bakery that produces getty images

45 million mooncakes a year, is making lowsugar cakes, as well as 250,000 ecologically friendly packages with a material Mooncakes are taken for baking at a food factory in Jialing Industrial Park, Nanchong, China.

resembling cardboard. The company is appealing to younger consumers with Hello Kitty and Mickey Mouse branding and

to do with GOD?’” said Douglas Young, a

hazelnut mooncakes; Godiva promotes a

mooncakes shaped like emoji from Line, a

Hong Kong native who founded the design

chocolate variety; Häagen-Dazs features

popular messaging app based in Japan.

company. “They were nothing I’d have

cookies-and-cream ice cream mooncakes.

myself. Hong Kong people think of them as

Goods of Desire, also known as GOD, a

ugly, fattening and out of date.”

Hong Kong design company and retailer

Young, whose products often poke fun

that produces articles as varied as T-shirts

Mandy Chan, a 23-year-old office worker, stopped by a Mrs. Fields Cookies

and furniture, offers mooncakes shaped like

at local traditions, focused on the ugly

outlet in a shopping mall to pick up a box

buttocks. The company sells 10,000 a season.

aspect and created “cheeky” mooncakes.

of chocolate mooncakes she had ordered

“Mooncakes always look the same,” he said.

online. “These are for me and my friends.

“Shouldn’t we make them hip and cool?”

We’re having a barbecue during the holiday,”

Kee Wah Bakery, one of the city’s traditional mooncake bakeries, first

Foreign companies have jumped on the

approached GOD in 2008. “My first

bandwagon. Starbucks offers espresso and

A giant panda eats a specially-made mooncake in Yantai, Shandong Province.

to buy traditional ones for my parents.”

getty images

getty images

reaction was, ‘What do mooncakes have

she said. “Of course, I went to another shop

In 2007, a 13-ton mooncake set a new Chinese record.

Portfolio

Essentials

Culture

There have been variations on the theme

Mainland China accounts for about

leap to other countries. Kee Wah Bakery

for decades. Tai Pan, a Hong Kong bakery

40 per cent of Maxim’s mooncake sales,

– a Hong Kong chain with outposts in the

chain, invented snowy mooncakes, a frozen

about double what it was five years ago.

mainland, Macau, Taiwan – sells them in

concoction like mochi, in 1989. In 1986,

Although the company would not disclose

the United States.

a chef at the Spring Moon restaurant at

exact figures, it said it sold “several million”

the Peninsula hotel created the custard

boxes of mooncakes in both Hong Kong

widespread popularity in international

mooncake, with a golden, flaky crust and a

and the mainland.

markets. When the Peninsula introduced

filling similar to that in the city’s famous egg

Lee said the company’s biggest China

But the mooncake does not have

mooncakes at its New York hotel last year, it

tarts. The lines to buy Spring Moon’s mini-

markets were the south and major cities

stuck to its custard-flavoured creation. “We

custard mooncakes became so long that the

like Shanghai and Beijing. The company

found that people who knew them – mostly

hotel now sells them only on the internet.

has also been expanding in recent years into

from New York’s Chinese community –

This season, it sold out of the Spring Moon

Fujian, Chengdu, Dalian and Xian. “China is

came to seek them out. A few others bought

cakes in five days.

the growth engine of our business, especially

them out of curiosity,” Tchen said. “Custard

the second- and third-tier cities,” he added.

is a more suitable flavour. The lotus paste is

“Whenever you deal with a festival product, there will always be growth

A handful of players have made the

a bit peculiar.” n

because it will never go away,” said Paul Tchen, the Peninsula’s group general manager for operations. “You, as an individual, have to buy mooncakes for your relatives. You, as a company, have to buy them for your customers. It is a must.”

Many food and travel companies based in Hong Kong have been expanding into the mainland with sales of mooncakes and other products. A 2014 Euromonitor report predicted double-digit growth in the Chinese bakery sector. And Beijing’s antigraft measures do not seem to have affected Hong Kong companies.

“I think the concern, in the old days,

getty images

90

was a mooncake with a little red envelope with you-know-what,” said Tchen of the Peninsula, referring obliquely to the “hong

The mooncake industry is worth $2 billion in annual sales in greater China.

bau” or “lai see” cash gift. “It wasn’t a problem with mooncake sales themselves.

Our sales in China are as strong as they ever were. There is real trust in Hong Kong-made mooncakes, especially as local residents there continue to be concerned about food safety.”

Bakeries from Hong Kong, Taiwan and Singapore have done particularly well in China because of worries about locally produced food.

“We have a strong brand reputation and image. Food safety is a key part of it,” said Martin Lee, Maxim Group’s general manager of Chinese restaurants and branded products. “Our slogan is ‘100 per cent made in Hong Kong’.”

Customers buy boxes of mooncakes at a supermarket in Hong Kong.

Portfolio

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Essentials

92

Environment

EnvironmEntallyfriEndly BioruBBEr Patagonia, a benefit corporation, is making wetsuits from a natural rubber derived from a desert shrub, reports Diane Cardwell.

E

arly on a recent Friday, Mitch

companies have shown interest, and

for wetsuits but on a par with other

Taylor, a local surfer, paddled

Quiksilver plans to have a biorubber wetsuit

brands’ premium gear – the suit will earn

out at County Line Beach off

on the market next year.

the company money and bolster its green

the Pacific Coast Highway near

Patagonia’s promotion of Yulex is the

to appeal to customers.

latest example of its unusual commitment

After carving a few waist-high waves, he

to advancing sustainability, sometimes at

gave it a positive review, pronouncing

the expense of its bottom line. It introduced

limits,” Rose Marcario, the chief executive,

it indistinguishable from other high-

organically grown cotton into its products

said, laughing, at the headquarters in

performance gear he had tried.

in the 1990s, pushing ahead even though it

Ventura, California, where employees store

“This is not a charity case – we have our

“I was really stoked on it,” he said. “There

lost customers and money on the transition.

their boards under a staircase and can test

was actually nothing different about it than

It has rejiggered its corporate structure so it

wetsuit prototypes across the highway at the

any other suit.”

can count success in factors that benefit the

C Street surf break.

The wetsuit’s cost reflects, in part, the

And yet there was. The suit, which has begun hitting the market, is made not from

long-term development the company

conventional, petroleum-based neoprene

undertook, running more than 200 tests

but from a natural rubber derived from

and field trials of the material to get the

a desert shrub. It is one way Patagonia is

balance of stretch, weight and durability

trying to nudge along a sport that has not

executives were looking for. “I knew that

always been environmentally conscious

if we could somehow change this process,

despite its roots in the natural world.

change the way that this material gets made, we could take the biggest step forward

Patagonia executives are also convinced that the many years of development and

environmentally for the wetsuit industry,”

testing they have supported have resulted

said Jason McCaffrey, who directs the surf

in a revolutionary material that will wind

division. “But we have to prove it.”

That ethos has its roots in the beginning

up not only in wetsuits but also in everyday

of the company, which grew from a rock-

items like sneakers and yoga mats. But if

climbing equipment business that Yvon

they have their way, only a few of those © 2014 New York Times News service

credentials, an important part of how it tries

Malibu, wearing a new Patagonia wetsuit.

Jon Kitamura shows off a wetsuit made by Patagonia from a new natural rubber extract.

Chouinard, an avid climber, surfer and self-

the rubber, Yulex, to a years-long exclusive

public, like helping the environment, rather

the Patagonia campus, where he still forges

contract, Patagonia is encouraging its

than simply maximising profit, without the

the occasional piton. As the business added

competitors to use the product, hoping

fear of being sued by potential investors.

outdoor clothing and equipment over the

products will bear the Patagonia name.

Instead of holding the manufacturer of

to see its use grow and drive down the price. Other wet suit and athletic apparel

taught blacksmith, began in a tin shed on

The company’s motives are not entirely

years, Chouinard continually pushed to help

altruistic. Priced around ¤400 – expensive

preserve the environment, whether through Portfolio

93

more mountain-friendly climbing gear or fleece from recycled materials.

To protect that approach, in 2012, the company, which is owned by the

they are adhering to the mission.

“Business can be the most powerful agent

an estimated 900 in the United States.

This form of incorporation, permitted in 26 states and the District of Columbia, requires executives to take into account not just how decisions will affect profit and shareholders but also how they will affect the public, generally defined as society or the environment. Though the rules vary among states, companies must produce an annual benefit report to demonstrate how October 2014

and the environment is not going to be a

for change, and if business doesn’t change,

healthy and sustainable way for us to live

then I think we’re all doomed,” Marcario

and for the planet to survive.” She added that Chouinard had said that every time

Chouinards, changed its structure. It became a benefit corporation, one of

said. “Business that puts profit above people

It introduced organically grown cotton into its products in the 1990s, pushing ahead even though it lost customers and money on the transition.

he made a decision that was right for the environment, it had made the company money, though sometimes not for a while.

Still, the company introduced wetsuits in 2006 but made them in what it considered an unsustainable way. Although Patagonia, like others in the industry, began using limestone-based neoprene to try to get away from fossil fuels, executives still complained in advertisements and a 2008 blog post that it was hardly green because it came from a

94

Essentials

Environment

non-renewable material.

At Yulex, those complaints were taken as a challenge. Jeff Martin, the chief executive and co-founder, was building a company largely around making non-allergenic products like condoms, catheters and gloves from the latex of the guayule plants they grew in the Arizona desert. Around 2009, Jim Mitchell, the chief operating officer, ran across the blog post, and the two decided they could replace neoprene with their biorubber.

They approached Patagonia and, once the partnership yielded a product, found themselves at an important trade show, meeting with other wetsuit manufacturers and athletic companies at the apparel maker’s booth.

Eric Jan Mathur, chief science officer at Yulex, holds seeds from the guayule plants.

“It was more like a house,” Leif Christoffersen, director of business development for Yulex, said of the exhibit.

“It had a second level.” In addition to wetsuit makers, Yulex executives say, they are talking with other companies to market products using their rubber, including mattresses and bras.

“We had customers looking for safe alternatives for those with latex allergy, and then we had customers looking for alternatives to petroleum-based products,” Martin said, “so a number of companies had

organic cotton.

”We had customers looking for safe alternatives for those with latex allergy, and then we had customers looking for alternatives to petroleum-based products.”

Fletcher Chouinard, Yvon’s son and the founder of a line of surfboards made at the Ventura campus, acknowledged the challenge, though he said that environmental attitudes among surfers varied across a wide spectrum.

Overall, he said, the market could be tough to crack.

“It’s inherently selfish as a sport,” he said.

“I don’t think people care enough. People are starting to put their money where their mouth is, but it’s slow.” n

been approaching us.”

Patagonia’s wetsuit is the first widely available consumer product derived from Yulex guayule rubber. Patagonia introduced suits with a blend of 60 per cent Yulex biorubber and 40 per cent conventional rubber in Japan at the end of 2012 and has been refining them ever since. The new suit, for men only, has added features like a thermal lining made from recycled materials and a slick external coating that keeps the wind out. Eventually, the company plans to use 100 per cent biorubber in its surf gear.

But the extent to which this matters to surfers is an open question, and the company may again be ahead of its customers, as it was with the switch to

Jim Mitchell stretches a rubber produced from guayule plants at Yulex in Arizona.

Portfolio

96

Picasso MuseuM to ReoPen at Last

Numerous delays, the ousting of the president, the ire of neighbours and infighting has marred the renovation of the Picasso Museum. But new president Laurent Le Bon says those problems are past, reports Doreen Carvajal.

With his horn-rimmed glasses and charcoal-grey suits, Laurent Le Bon is an unlikely Zorro to rescue the long-closed Musée Picasso in Paris’ Marais quarter.

When the state appointed him president in June and dispatched him on this emergency mission, French headlines hailed Le Bon in the name of that fictional masked outlaw who battled tyrannical officials. And riffing on an English translation of his last name and his reputation for diplomacy, curators in the international art world called him Larry the Good.

His task: reopen the museum’s regal 17th-century mansion after five years of construction and renovation, with several missed start dates and an employee revolt that led to the firing in May of the previous president on the grounds of autocratic management.

“I don’t think I’m Zorro,” said Le Bon, 45, who presided over the opening of the Centre Pompidou Metz, that museum’s branch in northeast France, in 2010 and is a specialist in the art of 16th- and 17th-century garden design. “I don’t believe we are at war. There is no conflict. My method is very simple: to assess the situation, to read what has been produced and to listen.”

The Picasso Museum, in the Hôtel Salé, has had its public space more than doubled to house the world’s largest collection of Picasso paintings and is now scheduled to open October 25, which would have been Picasso’s 133rd birthday.

On September 20-21, visitors got a free preliminary peek at the empty mansion and its grand staircase, extravagant Corinthian columns and cupids before some

© 2014 New York Times News service

500 paintings are hung, including some from Picasso’s personal collection. In the meantime, Le Bon is waging a charm offensive, including reaching a preliminary accord with the ousted president, Anne Baldassari, a Picasso scholar who had invested much of her career in the museum.

The ministry of culture and Le Bon were wrapping up an agreement to bring her back as a curator for the opening exhibition that she had already planned. (She was claiming a form of copyright on the arrangement of the paintings.) Her lawyer, Henri Leclerc – who made the novel claim – said he would not comment.

Portfolio

GETTY IMAGES

Essentials Art

October 2014

97

GETTY IMAGES

98

A view of scaffolding on the Hôtel Salé where the Picasso Museum is located, during the renovation of the building in Paris.

Laurent Le Bon, the new president of the Picasso Museum, has been tasked with ensuring the museum reopens without further delays.

Olivier Widmaier Picasso, a filmmaker

In addItIon to wooing the family, Le

broader circle of people affected by

in Paris who produced a documentary,

Bon hosted a flurry of personal and group

the expansion and has sought to mend

which will air on local television, about

meetings. The strategy was meant to turn

frayed relationships, including some

the family and the museum. “It symbolises

the page on what the French press at one

with Picasso’s descendants. This state-

reunification,” he said. “We walk in the

point called a psychodrama that figured in

run museum, started in 1985, owes its

same direction. My mother was sad to

the departure of the most recent culture

existence to the Picasso family, which

see that her father’s work had become a

minister, Aurélie Filippetti. She was

donated a trove of more than 5,000

hostage in this story. She felt that people

criticised for being slow to handle the

artworks after the artist’s death in 1973

at the museum were like survivors on a

museum affair, while costs soared to

under a law permitting heirs to contribute

raft, and they didn’t know whether we

¤52 million (about $68.3 million), and

art in lieu of tax payments.

were against them.”

a string of employees left.

Le Bon has also reached out to the

When the management shake-up happened, Claude Picasso, the artist’s son and a member of the museum board, erupted in fury, scorning any replacement as an impostor. However, since Le Bon’s appointment, Picasso has muted his criticism and declined to comment about the opening. Le Bon met with him and also visited Maya Widmaier Picasso, the artist’s daughter by his mistress – and frequent model – Marie-Thérèse Walter. Soon after that encounter, she offered a public demonstration of her support for the new leadership with a gift of Picasso sketches Guillaume Apollinaire that matches the other half, which is owned by the museum.

The choice was calculated to deliver a message of harmony, according to her son,

GETTY IMAGES

and a partial drawing of French poet

Anne Baldassari was ousted as president of the Picasso Museum for “autocratic management”.

Portfolio

Essentials Art Le Bon met with the employees, the local union, gallery owners and neighbours miffed by the endless construction. There is now discussion underway about changing the metal pergola facing a garden and public space that provoked neighbourhood criticism.

François Margolin, a documentary filmmaker and a neighbour who, together with a local preservation group, lodged complaints about the museum’s construction permits, said he met with Le Bon and came away impressed with his collegial style, an impression shared by the union. “He is not egotistical,” Margolin said.

The Pipes of Pan will be displayed at the museum’s opening.

GETTY IMAGES

“He has real experience opening museums.

A worker walks on the grand staircase of the museum.

inaugurate the museum as part of a round of high-profile openings. (The LouisVuitton contemporary art centre, designed

by Frank Gehry, opens the same week.)

GETTY IMAGES

“It’s like preparing a play, or a film, or a

The Picasso Museum has loaned out pictures to other museums to help finance the restoration.

musical spectacular,” Le Bon said, recalling how he was moved to tears when the first person walked in the door of the Centre Pompidou Metz. “An opening is magic.”

In this spectacle, the stars making a

He is more open and has a method of

produce more revenue through touring

reappearance include Picasso’s gigantic

working with other people, listening to the

exhibitions, in part because the museum

work The Pipes of Pan (1923), from his

opinions of others. He is really professional.”

is expected to finance more than 60 per

neo-Classical period, along with the works

cent of its annual budget, which has not

from his personal collection, by Renoir and

been set yet by the government.

Gauguin, a gaunt self-portrait from Picasso’s

Beyond the neighbourhood, Le Bon has also initiated contact with major

“It’s a public collection and does not

Blue Period, in 1901, and his grand collage

French museums that had had frosty

belong to me,” Le Bon said in an interview

Femmes à Leur Toilette (1938). The works

relations with his predecessor after she

at his office. “I am delighted that we have

by other artists will be housed in a luminous

spurned some requests for Picasso art

such a huge stock in reserve. And I also

room with exposed beams, natural light and

loans. In October, he is lending three

am glad that there are people that want to

a sweeping view of Paris.

Picasso works to the Musée d’Orsay for its

use it for great projects. That’s part of our

exhibition on the theme of the Marquis

métier: collection, exhibition.”

Out of habit, some neighbours in this medieval neighbourhood are bracing for

The scaffolding that has laced the

further delays, but Le Bon insists that the

museums in France and New York. Loan

mansion is gone. Police stand guard,

grand double doors will open on time and

fees for some of the works, which had

barricading the passageway except for

that the museum has restored its serenity.

travelled for years on the international

trucks transporting the first Picasso

exhibition circuit, had helped finance the

artworks to arrive after a long absence.

“That’s for sure. This is my job and my

restoration. Le Bon said he expects to

President François Hollande is expected to

passion.” n

de Sade, and he is planning more loans to

October 2014

“It’s certain that it will open,” he said.

99

Essentials

100

Fashion

A reboot for the sneAker Shoes made from Tyvek, a material consisting of high-density polyethylene fibres, are lightweight, sturdy and catching on with millennials, reports Claire Martin.

W

The shoes are a new addition to the

hen people first pick up a pair of

minimalist-footwear trend established

sneakers designed by

by brands like Crocs and Vibram, with

Steven Weinreb, they

its FiveFingers line, known as the

are typically perplexed. “They’ll say, ‘Oh

barefoot running shoes. Running shoe

wow, these are extremely lightweight, and

companies have long been reducing the

they’re so cool-looking,’” Weinreb says.

weight of athletic footwear, and Nike is

“‘But they’re made out of paper.’”

now using polyester yarn in some of its

The shoes are actually made from Tyvek,

lightweight shoes.

a material that is as light as paper, but also

“I call it techno-fashion with a

water-resistant and relatively sturdy and

sustainability sensibility,” Shawn Grain

breathable. The soles are rubber. Weinreb

Carter, associate professor of fashion

sells the shoes online and in boutique shoe

merchandising management at the

stores in the US through his company

Fashion Institute of Technology, says of

Civic Duty, based in Secaucus, New Jersey.

the new designs. “You’ve now got this

If you’ve had your attic insulated in

consciousness of not just fashion for

the past 30 years, attended a concert

fashion’s sake, but fashion to protect

requiring a wristband for re-entry,

the environment,” she says. “Tyvek is a

or sent or received a package, you’ve

nonwoven material that meets both those

probably used Tyvek. Created by DuPont

qualities. It’s post-industrial. It’s futuristic.

in 1955, it is made from high-density

It’s postmodern.”

Civic Duty markets its Tyvek sneakers

used, and continues to be used, for things like labels and book jackets. Tyvek has also been used in hazmat suits, banners, medical and industrial packaging and covers for cars and boats. Now designers are fashioning shoes, bags and other accessories from it.

as easy on the environment and suitable A model for Marithe Francois Girbaud wears a long Tyvek cover over a knee length dress.

for those who shun clothing made from animal products. Civic Duty recycles customers’ shoes at special recycling centres that convert them into “a picnic reUTers

© 2014 New York Times News service

polyethylene fibres and was originally

table or a park bench or something else that’s made from the Tyvek itself,” Portfolio

101

Weinreb says. (For recycling, customers must send the used shoes back to the company.) Since Civic Duty’s founding in 2009, its sales have totalled about $8 million, Weinreb said.

One of his competitors has taken a similar path, focusing its marketing on both environmental and cool factors. The three co-founders of Unstitched Utilities, in East Brunswick, New Jersey, met while

The shoes are actually made from Tyvek, a material that is as light as paper, but also water-resistant and relatively sturdy and breathable. The soles are rubber.

Unstitched Utilities began making its Tyvek sneakers in China, but has since relocated manufacturing to Vietnam. The shoes, in high- and low-top versions, sell for $50 to $135 a pair on its website and in about 30 shoe stores in the United States.

A third competitor in the Tyvek-sneaker market, Unbelievable Testing Laboratory was started in China two years ago by Token Hu, who was working at the design

working at Fila, the sports clothing and

firm Frog Design. He began experimenting

footwear company.

with Tyvek sneakers when his wife

One co-founder, Kevin Crowley, had worked in the hazmat-suit industry.

routinely couldn’t find shoes she liked that “Tyvek is a difficult material to work with,”

fit her very small feet.

Several years ago, the group began

says Jack Steinweis, another co-founder.

experimenting with Tyvek in shoe

“You’ve got to really know what you’re

Unbelievable Testing Laboratory. It is

designs, and they later dabbled in using

doing, and we had the right information.”

now based in both Shanghai and Las

recycled magazines (cut into strips and

Steinweis and his partners initially

Vegas and is marketing its products

sewn together) as a shoe material. Now

wanted to make the shoes in the United

to 23- to 35-year-old men who “work

they sell sports shoes made from Tyvek as

States, but couldn’t find a factory willing to

in the design, technology, information

well as canvas.

work with Tyvek or able to do it affordably.

and engineering spaces,” said Joseph

Steven Weinreb, the founder of Civic Duty, with shoes and other items his firm makes, in New York.

October 2014

Hu eventually left his job and started

Essentials

Fashion

Constanty, a co-founder, adding that the

consumers to recycle. “It all depends on

company does not actively market an

what percentage of the customers actually

environmental aspect.

send them back and on how diligent the company is about recycling them properly,”

The company sells the shoes on its

says Rachel Obbard, assistant professor

website for $68 to $78; it also offers

at the Thayer School of Engineering at

a Tyvek wallet. Unbelievable Testing

Dartmouth, who has researched and taught classes on materials in sports

Laboratory has also begun using a

equipment. “I personally don’t think

Kevlar blend and a microfibre in its shoe

it warrants the label ‘sustainably

designs. In September, the company

produced,’ ” Obbard wrote in an email.

started a Kickstarter campaign to help

And the shoes are probably not

finance the manufacturing of a new Kevlar-and-Tyvek boot that it’s calling

something you should plan on using for

the Moon Boot. The company’s shoes

your workouts, according to Obbard.

weigh less than a pound a pair, which is

“Tyvek is equally strong in all directions,

lighter than many traditional running

stain resistant, and has an excellent

shoes as well as casual sneakers like

strength-to-weight ratio,” she said.

Converse Chuck Taylors.

But, she added, it’s not elastic, and its

Civic Duty’s shoes are also made in

breathability isn’t as high as that of a

China. According to the market research

traditional running shoe. “I could see

firm IBISWorld, China is the world’s

having a pair of super light casual Tyvek

largest manufacturer of footwear, a $114

shoes that you could stuff into a backpack

billion industry there in 2013.

or suitcase,” she wrote. “I could not see playing sports in them.”

Owners of the shoe companies

Grain Carter acknowledged that there

each estimated about a yearlong life span for their shoes, which they put

were limits to Tyvek. But she sees the

on a par with sneakers made of more

shoes as appealing to members of the

traditional materials.

millennial generation willing to take risks.

“They’ll see it as performance art; they’ll

There are questions about the environmental sustainability of Tyvek.

It is, after all, made of plastic fibres.

And shoes aren’t particularly easy for

Hazmat suits are made from Tyvek.

see it also as functionality,” she says. “It will be an easy sale for that particular segment of the demographic.” n Tyvek is used in the building industry to insulate houses.

Tyvek shoes are setting the trend in minimalist footwear.

getty images

102

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Essentials

Other Business

Millionaire Artist, Aged 12 Kieron Williamson is a

visited his exhibition. He

perfectly ordinary boy. Yet

paints mostly scenes from

his talent for painting has

rural Norfolk and Cornwall,

made his family's life rather

in south-west England, where

extraordinary. The boy the

Kieron first asked to draw,

tabloids call Mini Monet

out of the blue, aged five, on a

has just sold out his latest

family holiday.

His mother is the director

exhibition of 40 paintings, raising more than £400,000,

of Kieron’s company, which

and he is already a millionaire.

was set up in 2010, helped by a specialist children’s solicitor

A mailing list of 10,000 people crave a Williamson and

and accountant who ensure

buyers from New Zealand,

that his fortune is held in trust

Indonesia and Germany have

for when he comes of age.

Ig Nobel Awards Strike Again Researchers who measured the slipperiness of banana peels and the reactions of reindeer to humans in polar bear suits were among the winners of this year’s Ig Nobel prizes for comical scientific achievements.

The annual prizes, meant to entertain and encourage global research and innovation, are awarded by the Annals of Improbable Research as a whimsical

REUTERS

104

counterpart to the Nobel Prizes.

for example, for detailing the hazards

Norway Rents Dutch Prison Space

of stepping on a banana peel in their

Norway plans to rent prison space in the

paper titled “Frictional Coefficient

Netherlands as the queue of convicts

Under Banana Skin.”

awaiting cells is growing and renovation work

for each 100,000 people, about a tenth of

at Norwegian jails is expected to cut capacity,

the level in the United States, and its

the justice ministry said.

re-offending rate of around 20 per cent is

Among the 10 awards, four went to researchers that took a peculiar interest in food. A team of Japanese scientists earned the Ig Nobel Physics Prize,

Ig Nobel prizes this year also went to researchers who measured the relative pain people suffer while looking at an

“At the moment, the queue is at 1,300

for several years.”

Norway’s incarceration rate is around 72

among the lowest in the world. The

ugly painting, investigated whether cat

custodial sentences, and there is a great

Netherlands’ prison population stood at

ownership can be mentally hazardous,

demand for detention space,” it said in

11,160 at the end of 2012, and has been

and studied how people who routinely

a statement. “The Netherlands has

falling continuously since 2008, according to

stay up late can be more psychopathic.

already leased prison capacity to Belgium

the Dutch prison service.

Portfolio

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